Ensure that Federal Rules for AML Whistleblower Programs align with Anti-Corruption Priorities

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On January 1, 2021, Congress passed the AML Whistleblower Act, which authorized the Departments of Justice and Treasury to accept confidential and anonymous complaints worldwide regarding the most significant international corruption issue: money laundering and violations of Bank Secrecy. In December, 2022, after a two-year campaign spearheaded by the NWC, we obtained unanimous support in the U.S. Senate and in the House Financial Services Committee, and through the largest grassroots campaign ever undertaken to force congress to enact effective whistleblower laws, the AML whistleblower enhancement act was attached to the federal budget as the last law passed in the 117th congress. 

This was a tremendous victory for whistleblowers and the worldwide fight to weed out corruption facilitated by the largest and most powerful banks in the world. Since these victories were achieved, the Department of Justice and Treasury have been stonewalling and delaying the enactment of the regulations necessary for these laws to become effective. For example, after over two years, neither department has procedures for whistleblowers to file anonymous cases even though this is required by the law. 

We need you to join our campaign to demand that the Departments of Justice and Treasury enact effective regulations unleashing the recognized power of whistleblowers worldwide to report terrorist financing, drug cartels, illegal profiteering by the largest banks in the world, embezzlement, and other forms of money laundering. Read about our Priorities below.

Priority I. Ensure that the process for qualifying as a whistleblower aligns with U.S. anti-corruption priorities:  

FinCEN’s final regulations should fulfill the mandate of the United States Strategy on Countering Corruption. In doing so, it must acknowledge, protect, and incentivize corruption-reporting as Identified in the OECD follow-up Phase IV audit report of the FCPA whistleblowing program. Relying on DOJ statistics, the OECD identified the following major sources of information related to international corruption: (a) Whistleblowers constitute 40% of reports – this would include persons who report to a wide variety of agencies or sources, not to formal federal whistleblower programs; (b) news media – which constitute 20% of reports; (c) civil society and international law enforcement – which constitute 20% of reports; (d) internal reports resulting in corporate self-reports – which constitute approximately 10% of reports. Given these strategic priorities and having witnessed both the strengths and weaknesses of existing regulations in other federal whistleblower programs, NWC calls on FinCEN to take the following into account when promulgating its regulations for the AML Whistleblower program: 

(1) Allow whistleblowers identified in case investigations to be eligible for rewards, rather than by mandating technical form requirements for whistleblower reward eligibility:

FinCEN’s final regulations for the AML Whistleblower program should NOT duplicate the SEC’s technical TCR form requirements in determining whether whistleblowers qualify for awards. Rather, they should allow whistleblowers to qualify for rewards if they have been identified as a whistleblower by the investigator in the case. FinCEN can look to the whistleblower reward-qualification procedures set forth by the IRS Tax Court as a model.

(2) Maintain the standard conditions for qualifying as a whistleblower, but expand the definition of “Voluntary” to its standard definition.

Similar to the SEC’s rules, FinCEN’s final regulations should require whistleblowers to demonstrate that he or she: (a) was the original source of the information used to trigger an investigation and/or significantly contribute to an existing investigation; (b) that the information was voluntarily provided to a third-party; and (c) that the whistleblower was not excluded from obtaining a reward based on the explicit statutory exclusions set forth by Congress, the whistleblower should obtain a reward.

However, the SEC’s unnecessarily prohibitive definition of “voluntarily provided” must not be duplicated in FinCEN’s final regulations. The final regulations should define the term “voluntary” based on its ordinary meaning, as set forth in the Oxford dictionary.  The regulations should explicitly state that a whistleblower would be considered voluntary if a request for information (including a subpoena) from the Department of Justice or Treasury – or another federal agency – follows a voluntary report/tip to any of the following sources:
– Any federal law enforcement or regulatory agency;
– Congress;
– A state regulatory or law enforcement agency;
– An international regulatory or law enforcement agency; an “anti-corruption” agency;
– The news media;
– An investigative journalist;
– Civil society organizations that thereafter report the whistleblower’s information to the media or a governmental organization;
– Other human rights defenders as understood by the Department of State or Agency for International Development.

(3) Ensure that critical whistleblowers have the right to make use of the AML Whistleblower Program:

FinCEN’s final regulations should:
(a) mimic the SEC’s regulations in prohibiting non-disclosure agreements or other contractual terms that interfere with whistleblowers’ rights to report;
(b) expand the definition of “analyst” to encourage representatives of civil society to assist whistleblowers in submitting information;
(c) NOT subject Foreign government officials to a blanket prohibition on obtaining a reward, as seen in other federal whistleblower programs. Prohibitions should exclude members of anti-corruption committees and persons working within government-owned banks or other agencies, such as doctors working in a state health care program, and persons working in sectors of the economy that are usually managed by the private sector in capitalist societies.

Priority II. Protect Whistleblowers

Whistleblower advocates and anti-corruption advocates share a common interest in protecting the confidentiality of whistleblowers and combatting whistleblower retaliation. Whistleblower programs only work well when whistleblowers trust that they can use them safely, without risking their physical well-being or financial stability. Therefore, the deterrent effect and anti-corruption potential of the AML whistleblower program will only be maximized if the regulations do the most to shield whistleblowers from retaliation and protect their confidentiality and anonymity. 

(1) Secure the Confidentiality & Anonymity of AML whistleblowers in ALL ongoing Federal investigations involving their disclosers:

As mandated by the law, FinCEN’s final rules must secure the confidentiality and anonymity of AML whistleblowers. However, as recognized in the U.S. Strategy on Countering Corruption, fully utilizing whistleblowers in the counter-corruption mission requires a whole-of-government approach, and therefore, inter-agency coordination is required to ensure that each agency acting on a whistleblower’s disclosure is taking steps to protect that whistleblowers anonymity, given the risk of retaliation involved in AML cases. FinCEN should establish procedures for coordinating with U.S. Embassies, FBI Legal Attachés, the Agency for International Development, the State Department, and other federal agencies who are likely to process AML claims. These agencies and departments operate existing anti-corruption programs and/or are already involved in investigating international corruption cases, and it is therefore paramount that FinCEN coordinate procedures for protecting AML whistleblowers with these entities.

(2) Establish Consistent Inter-Agency Protocol with respect to Whistleblowers who have participated in crime:

Consistent with the U.S. Strategy on Countering Corruption’s proclamation that “the United States stands in Solidarity” with “anti-corruption activists, whistleblowers, and investigative journalists,” the Department of Justice should not be permitted to indict or prosecute whistleblowers without vetting this potential decision to all of the law enforcement agencies and/or regulatory agencies that are also relying on the whistleblower as a source of information.  This contradictory approach creates confusion within the whistleblower community and may cause a severe chilling effect on other potential whistleblowers.  Prior to indicting a whistleblower, the Department should consider whether such a decision would interfere with a specific investigation involving that whistleblower and, more broadly, with law enforcement priorities that rely on the trust of whistleblowers and the willingness of whistleblowers to voluntarily disclose misconduct for which they may share some liability.

(3) Do not Incentivize – and absolutely do not require – Internal Reporting prior to filing AML claims with FinCEN, but ensure that those who file internally first maintain award eligibility.

The final regulations should not require whistleblowers to disclose their information internally prior to making a report to the government.  Any such requirement is inconsistent with the obstruction of justice laws, the rights of whistleblowers to remain confidential, and the specific statutory requirements of the AML Whistleblower Law. Like the SEC Whistleblower regulations, FinCEN’s regulations must give employees the option rather than mandate a requirement to file internally prior to filing with the government. They must also ensure that employees who have filed internally can still reasonably qualify for a reward.

However, FinCEN’s final regulations should not incentivize whistleblowers to report internally, as the current SEC whistleblower regulations do. Such incentives could cause employees who work for institutions insured by the Federal Deposit Insurance Corporation (FDIC) and/or who work for credit unions to lose protection against retaliation, as they are excluded by the anti-retaliation provisions in the AML Whistleblower Improvement Act. In other words, banks and credit unions can fire AML whistleblowers. The veil of anonymity guaranteed by reporting directly to FinCEN is the only way to protect their identities from being disclosed to their companies.

Likewise, international whistleblowers are not protected by any U.S. laws prohibiting retaliation, including the obstruction of justice laws and/or state common law remedies that may be applicable to workers in the United States.  It is well documented that the current state of international whistleblower laws is extremely problematic.

Since constituencies that will likely contribute to a large proportion of AML whistleblower tips would be put at risk by reporting internally, FinCEN’s regulations should not incentivize internal reporting through mechanisms used by the SEC, such as increasing the ultimate reward.

Priority III. Ensure that whistleblowers are fully compensated in a timely manner

The unique success of U.S. whistleblower programs stem from the high rewards, which incentivize whistleblowers who are risking it all to step forward with valuable information. The risk evaluation by whistleblowers, however, depends on the awards program genuinely compensating whistleblowers as promised in a timely manner. 

(1) Give full force to related action provisions:

The FinCEN Whistleblower Office should be cognizant of other agencies that may have a law enforcement interest in a whistleblower’s disclosure.  Referrals of the whistleblower’s information can thereafter be made to these other agencies, with the consent (or at a minimum with notice) to the whistleblower, provided that these agencies adhere to the strict confidentiality rules.  No referrals should be made to non-U.S. agencies without the express written consent of the whistleblower. The regulations should give full force and effect to the “related action” provisions of the law and should encourage interagency cooperation and coordination.

(2) Do NOT place a cap on whistleblower rewards:

The final regulations by FinCEN must not include a reward cap for whistleblowers. The SEC prohibited the capping of awards after two extensive rulemakings, during which the agency found that large awards are essential to publicize the program worldwide, incentivize other whistleblowers to step forward, and deter wrongdoing.

(3) Establish and abide by a strict deadline for paying awards:

FinCEN’s final regulations should contain strict deadlines for paying awards.  These regulations should be premised on the fact that the FinCEN and Justice Department investigators/prosecutors will know the identity and contributions of all whistleblowers who would qualify for a reward in a particular case. FinCEN should implement a process similar to that followed in the IRS whistleblower program, in which investigators fill out a form identifying whether or not there was a whistleblower involved in the case at the time the case file is closed.  This procedure speeds up the process of identifying the “real” whistleblowers who provided evidence. By integrating the affidavits/statements from the front-line investigators into the decision-making process in a timely manner, rewards should be payable within 1-year (or less).
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