The US government defence spending bill passed by Congress at the end of December included a new anti-money laundering (AML) whistleblower reward programme that has been heralded as a game-changer in efforts to clamp down on illicit money flows.
The release of the FinCEN files last year highlighting how fraudsters have been able to move millions of dollars of stolen money around the world – through leading banks such as HSBC, Barclays and Deutsche Bank – has emboldened authorities’ efforts to get on top of the issue.
The new programme provides a set process by which insiders with critical information regarding money-laundering schemes to come forward, report their information to the relevant authorities, and, if their information leads to a recovery, receive a reward for providing the critical information that allowed law enforcement to stop the scheme.
“Previously, a whistleblower might have critical information about a money-laundering scheme but no idea how to tell the relevant authorities,” said Mary Inman, a London-based whistleblowing specialist at law firm Constantine Cannon. “Now, any whistleblower will know exactly where to go, who to tell and how to report. And law enforcement, on the other end, will have a set procedure for how to receive this information and properly investigate it.”
Stepping up enforcement
The new law is broadly based on the decade-old Securities and Exchange Commission (SEC) whistleblower programme, which has made a sizeable impact in the fight against investor fraud. It is hoped that by following the same general outline, the new AML programme will replicate the SEC’s success in turning whistleblower information into actionable enforcement actions, Ms Inman said.
Until now, whistleblowers had no real incentive to come forward to reveal the way criminals, terrorists, kleptocrats, and tax evaders clean their money
“Money-laundering violations have generally fallen through the cracks in the whistleblower infrastructure in the US. This new law goes a long way towards filling those gaps,” she said.
The programme allows whistleblowers from anywhere in the world to bring to the US Treasury Department’s Whistleblower Office information about money laundering, and if the Treasury uses that information to impose a fine on the wrongdoer, the whistleblower will receive up to 30% of that amount.
“By design, money laundering is extraordinarily hard to detect without a whistleblower insider. As the FinCEN files investigation confirms, criminals often wash their illegal proceeds via an elaborate series of shell corporations located in offshore and favourable onshore jurisdictions throughout the world,” Ms Inman said.
“As the Danske Bank and Wirecard scandals have proven, international whistleblowers are essential to unlocking the complexities of far-reaching money-laundering schemes to US authorities.”
‘Whistleblowers welcome’
“The Treasury Department’s new whistleblower reward programme seeks to attract whistleblowers with a blinking ‘Whistleblowers Welcome’ sign guiding them to the Office of Whistleblower and providing a safety net in the form of a financial reward to compensate them for undertaking the risk of speaking up and bringing this information to authorities,” Ms Inman added.
“In the three plus years since we launched our international whistleblower practice in London, more than half of the whistleblowers who approached us had information about international money-laundering schemes somehow connected to the US.
“However, without a US whistleblower reward programme for money laundering, we had to turn them away. That all changed on New Year’s Day when the Department of Treasury’s historic whistleblower reward programme for money laundering became law,” she said.
“Until now, whistleblowers had no real incentive to come forward to reveal the way criminals, terrorists, kleptocrats, and tax evaders clean their money. By incentivising whistleblowers, the Department of Treasury is embracing the SEC’s wildly successful model to improve enforcement with whistleblowers connecting the dots for them.”