Anti-Money Laundering Whistleblower Law Expected to “Change the Game” for Sanctions Enforcement
When signing the Omnibus spending package for 2023 on December 29, 2022, President Joe Biden also passed the Anti-Money Laundering (AML) Whistleblower Improvement Act, offering enhanced protections and incentives to whistleblowers regardless of nationality or location. Experts have hailed the new Act as a game changer and noted that its quick passing in the 11th hour has a lot to do with the ongoing situation in Ukraine and the sanctions against Russia.
Let us take a look at what the new law entails and discuss its expected effects on efforts to combat money laundering.
Based on the Dodd-Frank Wall Street Reform and Consumer Protection Act, the Anti-Money Laundering Whistleblower Improvement Act introduces a few very important changes to the existing Anti-Money Laundering Act of 2020, namely:
- The establishment of a revolving “Financial Integrity Fund”, similar to the SEC’s whistleblower fund, which would be financed entirely by sanctions and serve to pay off awards to whistleblowers, without affecting the budget or taxpayers.
- A minimum threshold on awards of no less than 10% and no more than 30% in total of what has been collected of the monetary sanctions resulting from the whistleblowers’ information;.
- No limitation on citizenship or nationality of the whistleblowers and corporate auditors and compliance professionals can also qualify as whistleblowers.
- The possibility to report sanctions violations anonymously and confidentially.
- An explicit focus on hidden assets held by Russian nationals and a permission for whistleblowers to report banks and financial institutions that have assisted Russian nationals in money laundering or sanction evasion.
Experts believe that the concretization of the award size and the expanded eligibility and protections in the new act will lead to an increase in whistleblower activity and an increased enforcement of the restrictions placed on oligarchs and sanctioned entities, especially Russian ones. One of the Act’s sponsors, Senator Chuck Grassley, explicitly focused on the region when commenting on the Act’s passing: “Given the expansive sanctions we’ve implemented on Russia as they wage an unjust war in Ukraine, our legislation is urgently needed to hold bad actors accountable.”
Grassley also noted that he hoped that the changes would allow the new program to be as successful as the “the False Claims Act saving taxpayers $70 billion [and] the SEC whistleblower program saving over $4.8 billion and the IRS whistleblower program saving over $6 billion.”
And while the sponsors of these changes celebrate the recent developments, organizations will need to be more vigilant. Due to the fact that corporate auditors and compliance employers are now protected under the new act, employers are urged to reassess their “speak-up” policies and investigation protocols and invest in training, particularly of managers. In addition, the new changes have made this a transnational law, meaning that companies that have offices abroad will need to apply the same rules and training across the board.
Employers may think that there is plenty of time to act and that the ripple effect from the enhanced protections and incentives for AML whistleblowers may take a while to reach their shores, but the tidal wave may be bigger and faster than expected. As the National Law Review suggests, a recent spate of Wall Street layoffs could spark a wave of whistleblower action, now including money laundering tipoffs. And to add to that the Wall Street Journal reported that many lawyers had been reluctant to take on anti-money-laundering whistleblowers as clients before, but the legislative changes have turned the tables and lawyers have now “started to actively solicit for clients who are looking to blow the whistle.”
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