Whistleblower Program Promises to Reform Anti-Corruption Efforts

The Anti-Money Laundering Whistleblower Improvement Act has potential to be the most effective transnational anti-corruption law on the books.

In 2024, the law, and the AML Whistleblower Program it established, should start to deliver on this potential as whistleblower award programs continue to play a more central role in US global anti-corruption efforts.

The program dates to 2020 and the passage of the AML Act of 2020. This version of the law was undermined by loopholes, notably including a lack of mandatory whistleblower awards. Whistleblower advocates quickly called for reforms to the law while reporting showed that whistleblowers were unwilling to report to the program because of these deficiencies.

The AML Whistleblower Improvement Act, signed into law on Dec. 29, 2022, directly addressed the deficiencies with the AML Whistleblower Program. Qualified whistleblowers are now entitled to monetary awards of 10% to 30% of the funds collected in an enforcement action connected to their disclosure.

Furthermore, in light of Russia’s invasion of Ukraine, the Improvement Act expanded the AML Whistleblower Program to cover sanctions violations.

Under the reformed AML Whistleblower Program, individuals from across the globe may anonymously report money laundering and other violations of the Bank Secrecy Act as well as sanctions violations.

While the war in Ukraine and the need to track down illicit funds of Russian oligarchs was the major impetus behind the Improvement Act’s passage, the scope of the AML Whistleblower Program is truly global. The law’s jurisdiction covers traditional banks as well as cryptocurrency exchanges.

As can be seen from the Financial Crimes Enforcement Network’s crackdown on cryptocurrencies such as Binance, the new AML and sanctions whistleblower law’s scope and potential to stop criminals from using international monetary systems is vast.

For violating the BSA and “multiple sanctions programs,” Binance was forced to settle with FinCEN and pay a civil penalty of $3.4 billion. Its failure to implement the BSA rules on money laundering—such as proper know your customer requirements and the filing of suspicious activity reports—facilitated numerous criminal and terrorist entities to use its crypto exchange and violate sanctions laws.

Global Efforts

Money laundering is at the core of corruption worldwide as noted in the Biden administration’s anti-corruption strategy, the nation’s first whole-government approach to combating international corruption.

The United States Strategy on Countering Corruption explicitly endorses full use of the AML Whistleblower Program, noting the US “will implement newly established tools for investigating and prosecuting money laundering offenses” such as “financial rewards to incentivize reporting on Bank Secrecy Act violations in financial institutions.”

US whistleblower laws have already effectively incentivized international anti-corruption whistleblowers. The Dodd-Frank Act, whose whistleblower provisions the AML Whistleblower Improvement Act was modeled on, created whistleblower programs at both the Securities and Exchange Commission and Commodity Futures Trading Commission.

The AML, SEC, and CFTC whistleblower programs all have a transnational scope: Whistleblowers from anywhere can report on misconduct occurring overseas and qualify under the programs. Thousands of non-US citizens already use the Dodd-Frank programs to report securities law violations, fraud in commodity markets, and violations of the Foreign Corrupt Practices Act (which are covered under the SEC program).

In May 2023, the SEC issued a record $279 million whistleblower award, and reporting suggests it stems from a $1.1 billion FCPA settlement with Swedish telecommunications company Ericsson Inc. over allegations of a multi-year bribery scheme across the globe, including in Djibouti, China, Vietnam, Indonesia, and Kuwait.

The CFTC entered the field of global anti-corruption enforcement when it sanctioned Vitol Inc. $95.7 million in December 2020 for engaging in fraud and manipulation of markets—by paying foreign state-owned entities for confidential information and preferential treatment and engaging in manipulative trading activity.

Looking Ahead

The table is clearly set for the AML Whistleblower Program to take a leading role in the US’ global efforts in 2024, but two major questions remain in determining the program’s success: Will the Treasury Department and FinCEN fully use the program, and will the regulations for the program align with unique needs of international anti-corruption whistleblowers?

So far, the answer to the first question is reassuring, as FinCEN’s fiscal 2024 budget shows a real commitment to fully implementing the program. The budget includes a $29.35 million increase in previous year’s budget for purposes of implementing the AML Act, as well as 60 new full-time employees dedicated to AML Act implementation.

The second question remains up in the air, as Treasury and FinCEN are drafting the regulations to implement the AML Whistleblower Program. While most of these regulations could be copied from those for the Dodd-Frank programs, key changes need to be made if the whistleblower program is to be as effective in global anti-corruption efforts as it is positioned to be.

When writing the regulations for their whistleblower programs, the SEC and CFTC were unaware how expansive the programs’ transnational anti-corruption reach would be, and no rulemaking comments were filed from international groups. Certain aspects of their regulations thus unintentionally exclude a large-swath of international anti-corruption whistleblowers.

In particular, a narrow definition of “voluntary” whistleblowing that excludes whistleblowers who go to the news media, nongovernmental organizations, US embassies, and foreign law enforcement unfairly prejudices against international whistleblowers who are likely unaware of the strict requirements of US programs.

Treasury and FinCEN have the benefit of learning from these mistakes and can pass regulations that consider international whistleblowers’ unique needs.

If Treasury and FinCEN implement the AML Whistleblower Program in full accordance with White House strategy, it can live up to its promise to be the US’ most effective transnational anti-corruption law for years to come.

This article does not necessarily reflect the opinion of Bloomberg Industry Group, Inc., the publisher of Bloomberg Law and Bloomberg Tax, or its owners.

Author Information

Stephen M. Kohn is founding partner of whistleblower law firm Kohn, Kohn & Colapinto, which collaborated with congressional offices to draft amendments to the Anti-Money Laundering Improvement Act.

Geoff Schweller contributed to this article.

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