What Companies – And Not Just Financial Institutions – Need to Know about the New Anti-Money Laundering Whistleblower Program

Did you know that Congress supersized the Anti-Money Laundering (“AML”) whistleblower program when it included the program in the AML Act of 2020 (“AMLA”)? Then, last month, it expanded the program with the AML Whistleblower Improvement Act (“Improvement Act”). Passed as part of the Consolidated Appropriations Act, 2023, the Improvement Act funds the relatively unknown whistleblower program and expands it beyond violations of the Bank Secrecy Act (“BSA”) to include violations of US economic sanctions laws. Through this expansion, the Improvement Act extends the whistleblower program to include not only financial institutions with BSA obligations, but also any company that is subject to US jurisdiction if it violates US economic sanctions laws. The 2020 AMLA’s sweeping revisions bring the AML whistleblower program in line with other established whistleblower regimes, including the False Claims Act and the Securities and Exchange Commission’s whistleblower program, which was established under the Dodd-Frank Act.

Treasury’s Financial Crimes Enforcement Network (“FinCEN”) and the Office of Foreign Assets Control (“OFAC”) are clearly entering a revitalized era of whistleblower initiated enforcement actions and you should know what that means for you.

Summary of New Whistleblower Program

The AMLA offers considerable protection from retaliation, covering people who report potential violations to someone within their organization with supervisory authority over them or to someone they believe has authority to “investigate, discover, [] terminate, . . . [or] take any other action to address the misconduct,” as well as people who provide information to those outside their organization—i.e., to federal regulatory or law enforcement agencies, or to members or committees of Congress.

The definition of retaliation is broad. Employers may not “directly or indirectly, discharge, demote, suspend, threaten, blacklist, harass, or in any other manner discriminate against a whistleblower . . .” for, among other things, providing relevant information to authorities, or for testifying or assisting in investigations and administrative actions. Notably, the new provisions also protect whistleblowers who provide information to supervisors or certain individuals within their organizations regarding conduct that the whistleblower reasonably believes “constitutes a violation of any law, rule, or regulation subject to the jurisdiction of the Department of the Treasury, or a violation of [criminal money laundering statutes].”

The AMLA also lays out a path for whistleblowers to file a complaint initially with the Department of Labor if they “allege[] discharge or other discrimination, or [are] otherwise aggrieved . . . .,” and if the complaint is not resolved within six months (assuming that the delay was not caused by the claimant’s bad faith), whistleblowers can file actions in federal court and have a jury trial. This sweeping language casts a wide net over both the categories of individuals protected under the AMLA’s anti-retaliation provisions and the type of discriminatory behavior that could potentially violate those provisions. A successful whistleblower may seek reinstatement, compensatory damages, attorneys’ fees, double back pay with interest added, and other appropriate remedies regarding the prohibited conduct.

To prevail on a whistleblower retaliation claim, a claimant must show that: (1) he or she was retaliated against for reporting inappropriate activity; (2) he or she reported that information to the employer and/or the government, depending on the particular statute at issue; and (3) the disclosure was required or protected by that law, rule, or regulation. Further, the whistleblower must establish that he or she had a subjectively and objectively reasonable belief that the conduct in question violated the law.

An employer can normally avoid liability if it can establish by “clear and convincing” evidence that it would have taken the same adverse action against a complainant absent his or her protected activity. Thus, even if the employee can establish that he or she was retaliated against in violation of these laws, the employer can prevail if it demonstrates that it would nevertheless have taken the same action against the employee because of conduct unrelated to the alleged whistleblower activities.

The Improvement Act fills a gap in the AMLA by establishing the Financial Integrity Fund, capped at $300,000,000, to reward qualified whistleblowers. The Improvement Act also establishes a ten percent (10%) award floor alongside the AMLA’s thirty percent (30%) award cap to encourage potential whistleblowers to come forward.

In sum, the AMLA, now enhanced by the Improvement Act, significantly reshapes the existing BSA AML whistleblower program by providing extensive anti-retaliation protections for whistleblowers, expanding the program to sanctions violations, and authorizing hefty rewards for coming forward. The AML whistleblower program became effective immediately upon the AMLA’s enactment on January 1, 2021. FinCEN has announced the establishment of the Office of the Whistleblower and states that the Office is currently receiving whistleblower information. FinCEN has also stated that it will issue a proposed rule for public comment that will lay out additional information for implementation, although the timing of that rule is unclear.

Looking Ahead

As this program gathers steam, it will expose companies subject to the BSA—from traditional financial institutions to cryptocurrency exchanges as well as companies subject to US economic sanctions laws, to increased risk of whistleblower complaints.

Robust AML and economic sanctions compliance programs, including effective employee training, can mitigate the risk from potential whistleblowers. Because of the AMLA’s heightened protections for whistleblowers, effective coordination on internal complaints between legal, compliance, and human resources departments will further mitigate risks arising from the broadened program. Such risk mitigation measures could include:

• A clear internal complaint management process, which is shared with all employees both in writing and through periodic training;
• Training both staff and management on appropriate assessment of internal complaints;
• A process for effectively elevating complaints related to potential legal violations to the legal and/or compliance departments;
• A record-keeping system that documents all internal complaints, as well as the steps taken to address those complaints and the conclusions reached by any related investigations;
• Incentives for employees to internally report suspected violations of the AMLA’s anti-retaliation provisions and other laws; and
• Regular audits of internal complaint management and compliance programs to identify and promptly address any gaps.

If you have any questions about the enhanced AML whistleblower program, any provision of the AMLA in general, or economic sanctions compliance, we’re here to help. Contact the professionals at O’Melveny & Myers for assistance.

This memorandum is a summary for general information and discussion only and may be considered an advertisement for certain purposes. It is not a full analysis of the matters presented, may not be relied upon as legal advice, and does not purport to represent the views of our clients or the Firm. AnnaLou Tirol, an O’Melveny partner licensed to practice law in California, Greta Lichtenbaum, an O’Melveny partner licensed to practice law in the District of Columbia, Sid Mody, an O'Melveny partner licensed to practice law in Texas, Amanda M. Santella, an O'Melveny partner licensed to practice law in the District of Columbia and Maryland, Natasha Waglow Teleanu, an O'Melveny partner licensed to practice law in New York, and Juan Antonio Solis, an O’Melveny associate licensed to practice law in Texas, contributed to the content of this newsletter. The views expressed in this newsletter are the views of the authors except as otherwise noted.

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