Countering Money Laundering

Far too many criminals are successfully hiding their ill-gotten gains by laundering them through the banking system. New bipartisan whistleblower legislation pending before the U.S. Senate strengthens the U.S. government’s anti-money-laundering strategy in a host of ways – including giving whistleblowers a central role in the fight.

In September 2019, a group of eight bipartisan members of the U.S. Senate Banking Committee introduced the Illicit Cash Act to improve corporate transparency, strengthen national security, and help law enforcement combat illicit financial activity being carried out by criminal networks around the globe. The Act includes a strong whistleblower provision based on the most successful modern whistleblower reward programs.

In their press release, the members stated: “The Improving Laundering Laws and Increasing Comprehensive Information Tracking of Criminal Activity in Shell Holdings (Illicit Cash) Act, S. 2563, would, for the first time, require shell companies – often used as fronts for criminal activity – to disclose their true owners to the U.S. Department of Treasury. It would also update decades-old anti-money laundering and combating the financing of terrorism policies, by giving Treasury and law enforcement the tools they need to fight criminal networks. This includes improving overall communication between law enforcement, financial institutions, and regulators, and facilitating the adoption of critical 21st century technologies.”

The National Whistleblower Center (NWC) commends the members of the Banking Committee for the inclusion of a critical whistleblower provision and strongly urges Congress to pass the Illicit Cash Act.

Whistleblowers are a critical part of any global effective enforcement strategy. Insiders often have the best insight and access to information about economic crimes. This is exemplified by the case of Howard Wilkinson, a Danske Bank employee who reported the largest money laundering case in history with more than $230 billion laundered from the former Soviet Union into Western banks using phony partnerships and shell companies.

If the Illicit Cash Act were to pass, it would provide a powerful tool in combating illegal crime networks around the world and counter the threats of money laundering and terrorist financing through a proven success strategy – whistleblowers.

Every day, people around the world are victimized by large-scale theft, pollution and other crimes – crimes that are hidden by laundering ill-gotten gains through major banks. The Illicit Cash Act tackles this money laundering with a strategy that has proven effective in other crime-fighting efforts: enlisting whistleblowers to expose and help prosecute the crime. The National Whistleblower Center looks forward to helping get this important bill enacted into law.

– John Kostyack, NWC Executive Director

Whistleblower Provisions in the Illicit Cash Act 

Section 307 of the Illicit Cash Act creates a whistleblower provision based on the False Claims Act, an extremely successful whistleblower law originally signed into law during the U.S. Civil War by President Abraham Lincoln. Since its modernization in 1986, the Act has become the model for all effective modern anti-fraud whistleblower laws, including the revisions to the Securities Exchange Act, Commodity Exchange Act, and Internal Revenue Act.

All these laws are based on the concept of “qui tam”: empowering individuals and nongovernmental organizations to file a complaint with an agency, or a lawsuit, with evidence of fraudulent activity, assist in prosecuting the wrongdoers, and receive a reward drawn from the monetary sanctions recovered from the wrongdoer.

The Illicit Cash Act follows best practices for the major qui tam laws and includes:

  • Whistleblowers can raise their concerns anonymously and confidentially.
  • The information from the whistleblower must be “derived from the independent knowledge of analysis of a whistleblower.”
  • The information provided by the whistleblower is “not known to the Treasury, the Department of Justice, or an appropriate regulator, unless the whistleblower is the original source of information.”
  • The evidence of wrongdoing that “led to the successful enforcement” action must be “voluntarily provided” by the whistleblower.
  • When setting the amount of an award, the Treasury Department must take into consideration “the significance of the information provided by the whistleblower,” “the degree of assistance provided by the whistleblower,” and whether or not the whistleblower’s contributions aid in “deterring violations of the laws.”
  • The whistleblower provision sets a minimum reward level (10%) and maximum reward level (30%).
  • The Act also includes an anti-retaliation provision, similar to other federal anti-retaliation laws, providing some job protection to whistleblower, though retaliation cases are historically difficult to prove, and damages are limited.

These provisions are all found in the most successful whistleblower laws in the U.S., and the success of these types of laws are well-documented. As multiple U.S. government officials across agencies have testified, the modern whistleblower programs are effective force-multipliers. Former Securities and Exchange Commission (SEC) Chairman Mary Jo White commented that the SEC: “know[s] that the [whistleblower] regime does, in fact, create powerful incentives to come to the Commission with real evidence of wrongdoing that harms investors and it meaningfully contributes to the efficiency and effectiveness of our Enforcement program.”

Not only are the programs force multipliers, but they also enjoy broad public support. A Whistleblower News Network poll released in October 2020 shows that the American public considers corporate fraud a national priority and wants to help whistleblowers who expose it. When asked if passing stronger laws that protect employees who report corporate fraud should be a priority for Congress, 82 percent of those surveyed agreed, with 29 percent stating that it should be an immediate priority. This poll should provide Congress with all the encouragement it needs to act on pending whistleblower bills addressing private sector corruption like this one.

Given the urgent need to stop money laundering and terrorist financing, the Illicit Cash Act is critically necessary legislation. Its whistleblower provisions follow best practices well-established under the False Claims Act, the Internal Revenue Act, and Securities Exchange Act, and will greatly aid U.S. law enforcement in the detection and prosecution of money laundering violations. Congress should pass the Illicit Cash Act and ensure that Section 307 continues to implement the best practices for whistleblower laws that are consistent with the other successful qui tam laws.

– Stephen Kohn, NWC Chairman of the Board

Transnational Applications

Like other U.S. whistleblower qui tam reward laws, the Illicit Cash Act is transnational in scope and provides protection and awards to whistleblowers around the world. The violation reported can occur in any country, allowing whistleblowers who observe evidence of illicit financial activities in countries with weak regulatory administrations to report under a strong U.S. reward law with guaranteed protections.

Already, international whistleblowers have a proven track record in using similar laws. Since the modernization of laws, international whistleblowers have been rewarded millions in compensation for their enforcement assistance. From FY 2011 – 2019, more than 3,700 individuals from 122 countries filed cases in the U.S. under the Securities Exchange Act and Foreign Corrupt Practices Act alone.

The Illicit Cash Act offers a transnational solution to transnational problems: money laundering and terrorist financing. If passed, it provides a powerful opportunity to counter the continued global threat of these illicit financial activities and the criminal networks that perpetuate them.

Donate Today