AML Bill Key to Busting Russian Oligarchs

This article originally appeared in the National Law Review. Grace Schepis also contributed to the peice.

On December 7, the U.S. Senate unanimously passed the bipartisan Anti-Money Laundering (AML) Whistleblower Improvement Act (S.3166/H.R.7195). The House Committee on Financial Services has previously approved the bill, which now awaits a final vote in the House. With support from key representatives in the House, namely the Chair of the House Appropriations Committee Rosa DeLauro (CT-03), the bill could be passed this year on the suspension calendar.

The bill has widespread bipartisan support. Much of this support, and the sense of urgency surrounding getting the bill, is an understanding that the law could be used immediately to help fight Russian aggression, money laundering, and sanctions-busting. The empirical data backs up these arguments. Whistleblowers from each country directly involved in Russian corruption would be incentivized and protected under this new law.

Modeled on Dodd-Frank – Which Has Transnational Application

The AML whistleblower bill is modeled directly on the remarkably successful Dodd-Frank Act. Like Dodd-Frank, the AML whistleblower bill will have transnational reach. It will provide whistleblowers in countries that lack an effective rule of law the ability to file anonymous and confidential reports, with a minimum risk of ever being fingerprinted in their homelands.

Dodd-Frank’s confidentiality and reward procedures have incentivized thousands of non-U.S. citizens to blow the whistle on corruption in their homelands. This is because violations of the Foreign Corrupt Practices Act are covered under Dodd-Frank. From 2011 through 2021, over 5,000 whistleblowers from over 130 foreign countries have filed claims with the U.S. Securities and Exchange Commission (SEC). The FCPA covers foreign bribery. The new AML law will expand that coverage to include money laundering and sanctions-busting, prompting whistleblowers to disclose where all of the wealth of the sanctioned-Russian oligarchs is hidden.

Furthermore, the success of the Dodd-Frank procedures has been highly praised from all sides of the political spectrum. Former Trump-appointed SEC Chairman Jay Clayton said that “the whistleblower program” is a “critical component of the Commission’s efforts to detect wrongdoing . . . particularly where fraud is well-hidden or difficult to detect.” The Biden-appointed Director of the SEC’s Division of Enforcement Gurbir Grewal remarked that the SEC’s program “played a critical role in the Division of Enforcement’s ability to effectively detect wrongdoing . . . and bring violators to justice”.

In 2016, the Organisation for Economic Co-operation and Development (OECD), one of the most prestigious and well-respected economic organizations in the West, released their Phase IV Monitoring Guide and audit on the United States which concluded that the Dodd-Frank law was:

“a good practice given that [the government] provide powerful incentives for qualified whistleblowers to report foreign bribery allegations against issuers.”

President Putin and his Oligarch Friends: Beware

Russian President Vladimir Putin and his oligarch enablers have much to be afraid of if Congress passes the AML whistleblower law. Dodd-Frank has already incentivized over 2000 reports from countries where whistleblowers will have the hard evidence needed to successfully prevent and prosecute Russian corruption that is fueling the war in Ukraine.

The following figures are all based on the Annual Reports produced by the SEC’s Office of the Whistleblower. These reports provide a breakdown of countries where non-U.S. citizens have filed formal claims reporting foreign corrupt activities that the current Dodd-Frank Act covers.

Figure 1 shows the number of Russian and Chinese whistleblowers who have made reports to the SEC from their respective countries. These anti-corruption activists, whistleblowers, and insiders within Russia are already willing to report foreign bribery and other corrupt activities to U.S. law enforcement under Dodd-Frank.

It can be safely assumed that the same anti-corruption forces within Russia would also be willing to disclose money laundering and sanctions-busting under the new law. The AML/Sanctions whistleblower law will give the repressed anti-corruption community within Russia a means to be effective. The same goes to China, which is also clearly a potential major source for information on sanctions-busting. Those in Russia need to know that they can confidentially and anonymously report money laundering, sanctions-busting, and precisely where in the West Russian oligarchs have hidden their wealth. They need to know that if their information is valid, and results in an enforcement action, they will be fully compensated.

Figure 2 displays the number of whistleblowers from the United Kingdom, the leading nation in which Russian oligarchs reside outside of Russia, who have filed claims under the Dodd-Frank Act. Many of these are in the financial services sector. When the Danske Bank scandal revealed that $243 billion was laundered from Russia and the former Soviet republics into Western banks, it was noted that money launderers all used U.K. LLPs as their intermediary. These launderers included members of Vladimir Putin’s family and the Russian secret police (the FSB). Activating U.K. whistleblowers who clearly have extensive information on Russian oligarchs and money laundering would be an immediate benefit of passing this law.

As represented in Figures 3 and 4, all of Russia’s major trading partners have had significant whistleblower activity under Dodd-Frank. As in the case of Russia, China, and the United Kingdom, whistleblowers from these countries have been incentivized by Dodd-Frank’s mandatory reward provisions to make confidential and anonymous reports. Figure 3 concerns the number of Dodd-Frank Act claims filed from the counties that are Russia’s major trading partners (excluding China, which is documented in Figure 1). Countries that have strong trading relationships with Russia are also countries that have the greatest potential for whistleblowers who may have information on sanctions-busting activities.

Figure 4 concerns whistleblowers who have come from countries that are the major trading partners with Belarus. Given that Belarus is a strong Russian ally, these countries may have whistleblowers who are aware of sanctions-busting activities.

As can be seen from Figure 5, when you combine the whistleblowers from all of these countries, it is clear that there is a large number of potential sources for whistleblowing on money laundering and sanctions busting by those who reside in the nation’s most likely to have high- quality informants residing there. There are likely to be hundreds, if not thousands, of whistleblowers in these countries with insider information on Russian oligarchs, money laundering, and sanctions-busting who would be willing to step forward if they had the anonymity, confidentiality, and reward provisions afforded to whistleblowers under the Securities Exchange and Dodd-Frank Acts.

The House Must Act Now

All of the major whistleblower rights groups strongly support this law. Taxpayers Against Fraud (TAF) provided letter-testimony to Congress that their members have had contact with whistleblowers with information regarding money laundering, but who will not come forward until they have the legal protections afforded under the pending AML/Sanctions whistleblower bill. Likewise, we are aware of non-U.S whistleblowers with detailed information on Russian oligarchs — both individuals and sanctioned companies — listed on the U.S. sanctions list. This is why the National Whistleblower Center, Whistleblower Network News, and prominent whistleblowers themselves are urging citizens to contact the House Appropriations Committee Chair, whose support is needed to have the bill voted on in the House.

The Anti-Money Laundering Whistleblower Improvement Act law needs to be enacted immediately. The strong history of whistleblower activity via the FCPA suggests that numerous well-positioned whistleblowers with high quality information can and will come forward given these protections.

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