New whistleblower provisions in anti-money laundering act fall short of established Dodd-Frank protections

by Karen Torrent, Policy Counsel

Published on December 14, 2020

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New whistleblower provisions in anti-money laundering act fall short of established Dodd-Frank protections

The annual National Defense Authorization (NDAA) bill authorizing billions of dollars in program and funding levels for the Department of Defense has become the favored vehicle that unrelated bills hitch a ride on because it is one of the few must-pass bills.  The same held true for 2020, with the 2021 NDAA conference report passing the Senate and the House on Friday. It now goes to the President to sign.

One unrelated bill now attached to the 2021 NDAA is the bill formerly known as the Illicit Cash Act (S2563), enrolled as Title LXIII, Anti-Money Laundering and Countering the Financing of Terrorism. The goal of Title LXIII is to combat money laundering and terrorist financing, and it contains whistleblower protections. The bill authorizes the Financial Crimes Enforcement Network (FinCen) of the Treasury Department to expand disclosure requirements regarding the ownership of corporations and sets forth additional requirements regarding anti-money laundering and combating the financing of terrorism programs.

Congress should be commended for taking action to address money laundering and terrorist financing and for including protections for whistleblowers.  However, despite Congress’ best intentions, the whistleblower awards provision in Title LXIII fall short of other federal financial whistleblower award laws.

The 2010 Dodd-Frank Wall Street Reform and Consumer Protection Act, which created the Securities and Exchange (SEC) and Commodity Futures Trading Commission (CFTC) whistleblower programs, set forth minimum and maximum award levels – not less than 10 percent and not more than 30 percent – that qualified whistleblowers were eligible to receive from recovered monetary sanctions. Conversely, Title LXIII of the NDAA 2021 only contains the Dodd-Frank award ceiling of 30 percent with no award minimum or floor. A whistleblower is only eligible to receive “in the aggregate amount equal to not more than 30 percent, in total, for what has been collected of the monetary sanctions…” (NDAA 2021, Section 6314. Updating Whistleblower Incentives and Protection p. 2936).

Failure to include an award minimum discourages rather than encourages whistleblowers to come forward to assist FinCen and law enforcement in exposing money laundering and terrorist financing.  It is highly unlikely that persons with relevant information relating to illegal money laundering and financing terrorism will risk their livelihoods, reputations and the potential of high litigation costs without reasonable financial assurances.  Moreover, not having an award minimum gives the Treasury Department significant discretion without oversight. For instance, there is nothing to prevent FinCen or Treasury from awarding a qualified whistleblower who assists in collecting money sanctions over the required $1 million a minimal amount, even a single dollar.

Given the weaknesses in Title LXIII, there is a clear need for future legislation that will strengthen whistleblower protections for those individuals with evidence of money laundering and terrorist financing. Other successful qui tam laws provide a powerful framework on which these protections can be based.

Learn more about the National Whistleblower Center’s work to counter money laundering here.

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