Whistleblower Rewards for Reporting Money Laundering

The Anti-Money Laundering Act of 2020 incentivizes whistleblowers to report violations of the anti-money laundering laws to the Department of the Treasury’s Financial Crimes Enforcement Network (FinCEN). The AMLA requires FinCEN to pay an award of up to 30 percent of collected monetary sanctions that it recovers in a judicial or administrative action brought under the Bank Secrecy Act that results in sanctions exceeding $1,000,000.

The SEC can also pay awards to whistleblowers for disclosing a broker-dealers’ failure to file suspicious activity reports or failure to maintain an anti-money laundering compliance program.

Contact the experienced SEC whistleblower lawyers at Zuckerman Law for a free, confidential consultation. The law firm’s SEC whistleblower attorneys will work to quickly provide SEC whistleblowers with the highest-quality representation.

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Money Laundering Enforcement

Fines for money laundering can be substantial. In December 2022, Danske Bank agreed to pay $413 million to settle charges that it violated the antifraud provisions of the Securities Exchange Act of 1934 by misleading investors about its AML compliance program in its Estonian branch and failing to disclose the risks posed by the program’s significant deficiencies. Danske Bank has agreed to pay more than $2 billion as part of an integrated, global resolution with the SEC, the Department of Justice, the United States Attorney’s Office for the Southern District of New York, and Denmark’s Special Crime Unit.

And in February 2018, U.S. Bancorp/U.S. Bank paid $613 million in fines and forfeitures to settle charges that it failed to maintain adequate safeguards against money laundering. In particular, U.S. Bancorp/U.S. Bank limited the number of transactions its systems would flag as suspicious and processed Western Union transactions for non-customers.

SEC Takes Aim at Broker-Dealers for Anti-Money Laundering Violations

On June 5, 2017, the SEC charged brokerage firm Alpine Securities Corporation (Alpine) with securities law violations related to its ineffective anti-money laundering program. According to the SEC’s complaint, Alpine failed to adequately file suspicious activity reports (SARs) for at least 1,950 stock transactions that the firm flagged as suspicious. The SEC found that Alpine’s “records contained information reflecting material red flags of money laundering, securities fraud, or other illicit financial activities relating to its customers and their transactions,” and that Alpine “routinely and systematically failed to identify and report suspicious activity in its SAR filings.”

The SEC charged Alpine with thousands of violations of Section 17(a) of the Exchange Act and Rule 17a-8, and sought an order requiring Alpine to pay civil money penalties pursuant to Section 21(d) of the Exchange Act, which provides for penalties ranging from $5,000 to $500,000 for each violation The SEC’s complaint reveals that the SEC also charged many of Alpine’s customers with federal securities laws violations, including violations relating to transactions that cleared through Alpine.

SEC and FINRA Continue to Prioritize Anti-Money Laundering Efforts

In 2020, the SEC announced that “Anti-Money Laundering” was on the agency’s List of Examination Priorities. The SEC’s examination priorities “reflect certain practices, products, and services that [SEC’s Office of Compliance Inspections and Examinations] perceives to present potentially heightened risk to investors and/or the integrity of the U.S. capital markets.” In the priority list, the SEC clarifies that it will continue to scrutinize broker-dealers’ anti-money laundering programs by:

Examining the appropriateness and effectiveness of broker-dealers’ anti-money laundering programs;
Reviewing how broker-dealers are monitoring for suspicious activity; and
Assessing broker-dealers’ compliance with SAR requirements.

In 2016, the SEC announced that it would share more of its oversight responsibilities of the broker-dealer industry with the Financial Industry Regulatory Authority (FINRA). Since 2017, and in lockstep with the SEC, FINRA included “Anti-Money Laundering and Suspicious Activity Monitoring” on its 2020 Annual Regulatory and Examination Priorities Letter. Both the SEC and FINRA have increased enforcement actions against broker-dealers for anti-money laundering program violations.

Broker-Dealer Anti-Money Laundering Requirements

The primary anti-money laundering regulations for brokers or dealers require, among other things, the establishment and implementation of an anti-money laundering program, which includes, at a minimum:

Policies, procedures, and internal controls reasonably designed to achieve compliance;
Independent testing for compliance;
Monitoring of the operations and internal controls of the program;
Ongoing training for appropriate persons; and
Appropriate risk-based procedures for conducting ongoing customer due diligence, which includes:
- Establishing, documenting, and maintaining a written Customer Identification Program; and
- Continuous monitoring to identify and report suspicious transactions.

In the event that a broker-dealer identifies a suspicious transaction, the firm is required to file a SAR with the U.S. Treasury Department’s Financial Crimes Enforcement Network (FinCEN). In the SAR’s narrative section, broker-dealers must “[p]rovide a clear, complete and chronological description . . . of the activity, including what is unusual, irregular or suspicious about the transactions(s).” Broker-dealers violate federal securities laws (specifically, Section 17(a) of the Exchange Act and Rule 17a-8) when they:

Fail to file SARs; or
File inaccurate SARs (e.g., incomplete narratives, incomplete critical field information, incomplete identification of suspicious activity, etc.).

These violations deprive regulators and law enforcement of important information that could be used to identify potential securities law and money laundering violations.

SEC Whistleblower Program Pays More than $1.3 Billion in Awards to Whistleblowers

In 2010, Congress created the SEC Whistleblower Program to “motivate those with inside knowledge to come forward and assist the Government to identify and prosecute persons who have violated securities laws and recover money for victims of financial fraud,” S. Rep. No. 111-176, at 110 (2010).

In its short history, the SEC Whistleblower Program has enabled the SEC to uncover significant investment fraud schemes and halt ongoing fraud. Since 2011, the SEC Whistleblower Office has received over 62,000 tips. The SEC has paid more than $1.3 billion in awards to whistleblowers for providing information that led to successful enforcement actions. According to a recent report of the SEC Office of the Whistleblower, “[e]nforcement actions brought using information from meritorious whistleblowers have resulted in orders for more than $6.3 billion in total monetary sanctions, including more than $4.0 billion in disgorgement of ill-gotten gains and interest, of which more than $1.5 billion has been, or is scheduled to be, returned to harmed investors.”

SEC and FINRA Enforcement Actions

In May 2016, FINRA fined Raymond James & Associates and Raymond James Financial Services $17 million for widespread violations related to their anti-money laundering programs. The violations stemmed from the firms’ failure to establish and implement adequate anti-money laundering programs, which in turn precluded the firms from meeting their duty to prevent, detect, investigate, and report suspicious activity from at least November 2011 through June 2014.
In December 2016, FINRA fined Credit Suisse Securities (USA) LLC $16.5 million for “significant deficiencies” in its anti-money laundering program. According to FINRA, Credit Suisse’s program failed to effectively monitor/detect suspicious trading and money movements from at least January 2011 through December 2015. As a result, Credit Suisse was unable to determine whether to file required SARs.
In January 2015, Oppenheimer & Company paid $10 million to settle an action by the SEC and FinCEN for failure to file SARs. According to the SEC’s complaint, Oppenheimer’s anti-money laundering program identified suspicious activity that needed to be “escalated” immediately. Specifically, the activity stemmed from an account that: “(i) was a foreign broker-dealer doing business in the U.S.; (ii) selling ‘low-priced stock’ on behalf of customers; and (iii) that it immediately wired the proceeds out of the Oppenheimer account.” Despite these and other red flags, Oppenheimer failed to file SARs with FinCEN.
In February 2016, the SEC fined E.S. Financial Services $1 million for violating anti-money laundering laws by “allowing foreign entities to buy and sell securities without verifying the identities of the non-U.S. citizens who beneficially owned them.” As mentioned, federal securities laws require broker-dealers to establish, document, and maintain a written Customer Identification Program.

Experienced SEC Whistleblower Attorneys: Tier 1 Firm

The experienced whistleblower lawyers at Zuckerman Law represent whistleblowers worldwide before the SEC under the Dodd-Frank SEC Whistleblower Program. The firm has a licensed Certified Public Accountant and Certified Fraud Examiner on staff to enhance its ability to investigate and disclose complex financial fraud to the SEC, and two of the firm’s attorneys served on the Department of Labor’s Whistleblower Protection Advisory Committee and in senior leadership positions at a government agency that protects whistleblowers.

Firm Principal Jason Zuckerman has been named by Washingtonian Magazine as a “Top Whistleblower Lawyer” and the firm has been ranked by U.S. News as a Tier 1 Firm in Labor & Employment Litigation.

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Leading whistleblower law firm Zuckerman Law has substantial experience investigating securities fraud schemes and preparing effective submissions to the SEC concerning a wide range of federal securities violations, including: