What is the Anti-Money Laundering Act?
The Anti-Money Laundering Act (AML Act) is a federal law in the United States that aims to prevent and combat money laundering and terrorist financing. It is part of the Bank Secrecy Act which requires financial institutions to have strict “know your customer” rules and mandates the filing of “Suspicious Activity Reports, or “SARS.”
The types of illegal activities the AML Act covers include failure to implement procedures to implement the Bank Secrecy Act, tax evasion, foreign bribery, sanctions-busting, drug trafficking, human trafficking, arms dealing, foreign corruption and any conduct designed to hide the “beneficial ownership” of money.
The AML laws in the US are enforced by various federal agencies, including the Department of the Treasury, the Financial Crimes Enforcement Network (FinCEN), the Internal Revenue Service, and the Department of Justice, and it applies to foreign and domestic financial institutions, casinos, money service businesses, and other designated non-financial businesses and professions.
The AML Act contains whistleblower award provisions modeled off those found in the Dodd-Frank Act, the law which established the SEC Whistleblower Program. These provisions, which were strengthened in 2022 with the passage of the AML Whistleblower Improvement Act, offer monetary awards and anti-retaliation protections to whistleblowers who report money laundering violations.
Continue reading to learn more about the Anti-Money Laundering Act!
Understanding AML Law
The Anti-Money Laundering Act of 2020 (AML Act) passed on January 1, 2021. This legislation amended and strengthened the existing Anti-Money Laundering Act of 2001, which was enacted to combat money laundering and terrorist financing in the Philippines.
The Anti-Money Laundering Act has expanded significantly from the 1970 Bank Secrecy Act, which required banks to report deposits over $10,000 to regulators. There have been other enhancements, which include the following:
- Scope: The AML Act applies to a wider range of financial institutions, businesses, and employees, including non-bank financial institutions such as money services businesses and casinos. It also covers non-financial businesses and professions, including lawyers, accountants, and real estate agents.
- Required reports: The AML Act requires financial institutions to report suspicious activity, including large cash transactions and wire transfers. It also requires the reporting of transactions that may involve money laundering or terrorist financing.
- Record keeping: The AML Act requires financial institutions to maintain detailed records of their transactions, including the identity of their customers, for a minimum of five years.
- Penalties: The AML Act imposes significant penalties for non-compliance, including criminal charges and civil fines.
- International cooperation: The AML Act includes provisions for international cooperation in the investigation and prosecution of money laundering and terrorist financing. This includes the sharing of information with foreign law enforcement agencies and the freezing of assets held in foreign banks.
For banks, they must meet compliance by verifying the identity of their clients using the Know Your Customer (KYC) process. They must also understand the nature of the clients activity and also verify the sources of the funds to determine whether both are legitimate.
What are the steps in money laundering?
Money laundering is the process of disguising the proceeds of criminal activity as legitimate funds. There are generally three steps in the money laundering process:
- Placement: This involves introducing the proceeds of criminal activity into the financial system. This might be done through activities such as depositing cash into a bank account or buying assets such as real estate or artwork with illicit funds.
- Layering: This involves separating the illicit funds from their source by making it more difficult to trace the money back to its criminal origins. This might be done through a series of financial transactions, such as transferring funds between accounts or exchanging them for foreign currency.
- Integration: This involves bringing the laundered funds back into the legitimate economy, so they can be used without arousing suspicion. This might be done through investments, businesses, or other financial instruments.
Rewards for Reporting Money Laundering
Under the Anti-Money Laundering Act, a person qualifies for a whistleblower award if they provide information or assistance that leads to the successful investigation or prosecution of a money laundering offense. This could include information about suspicious financial transactions, the identities of individuals involved in money laundering activities, or other relevant information.
The AML Whistleblower Improvement Act, which was enacted on December 29, 2022, addressed shortcomings in the AML Act’s original whistleblower award provisions. Now, qualified whistleblowers are entitled to an award for between 10% and 30% of the sanctions collected against a money launderer. Award amounts vary depending on the significance of information provided and other factors.
Who’s Eligible?
Individuals who work in the financial industry, such as bank employees, as well as members of the general public who may have knowledge of suspicious financial activity are eligible for whistleblower awards under the AML Act. Furthermore, whistleblowers do not need to be U.S. citizens or to be located in the U.S. to qualify for AML whistleblower awards.
Protection from Retaliation
The Anti-Money Laundering Act protects whistleblowers from being punished for disclosing information or participating in other protected activities related to covered violations. This protection applies to any individual or group of individuals who share this information with their employer or government officials, such as the Secretary of the Treasury or the Attorney General. However, this protection does not extend to employers that fall under the jurisdiction of the Federal Deposit Insurance Act or the Federal Credit Union Act.
What is considered retaliation?
Retaliation is an adverse action against an individual because of activity protected by AMLA. Retaliation can include several types of actions, such as being fired or laid off, demoted, denied overtime, bonuses, or promotions, intimidation, blacklisting, relocating, and harassment among other measures aimed to punish an individual.
How Do I File AML Claims?
To file anti-money laundering (AML) claims, you will need to follow these steps:
- Gather all relevant information and documentation
This may include bank statements, transaction records, and any other evidence that supports your claim. - Contact the appropriate government agency
In the United States, the Financial Crimes Enforcement Network (FinCEN) is responsible for enforcing AML laws. You can report a suspected AML violation through their website or by calling their toll-free hotline at 1-866-556-3974. - Submit your claim
Depending on the agency you are reporting to, you may be able to submit your claim online, via mail, or in person. Make sure to include all relevant documentation and a clear explanation of your claim. - Wait for a response
Once your claim has been received, the agency will review it and determine if further action is necessary. This process can take several weeks or months, so be patient. - Follow up if necessary
If you have not received a response from the agency within a reasonable amount of time, or if you have additional information to report, you may need to follow up with them to ensure that your claim is being properly addressed.
If you decide to file confidentially and anonymously, the rules require that the whistleblower be represented by an attorney licensed to practice law in the United States. Furthermore, filing a reward claim based on AML violations is extremely complex, as there are at least three reward laws that may be applicable to the claim, and each has separate filing rules. An experienced AML attorney can help guide you through the process.
Our Firm’s Cases
On September 19, 2018, news broke of $234 billion money laundering scheme. The scheme moved rubbles out of Russia, converted them to dollars at the Estonian branch of Danske Bank, and then moved the dollars to New York with the assistance of three correspondent banks (Bank of America, J.P Morgan, and Deutsche Bank). Danske Bank admitted all of its internal controls designed to prevent money laundering had failed. The bank also revealed that the scheme had been reported to the highest levels of the bank by a whistleblower over four years before. The whistleblower’s identity was required to be secret. But it took only days for his name to leak out. Soon the entire international banking world learned that the former Danske Bank manager Howard Wilkinson had exposed the largest money laundering scheme in history, and that the bank had tried to cover it up.
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This piece originally appeared in JD Supra. A two-year campaign to create an effective law incentivizing whistleblowers to report money laundering and sanctions busting has ended with a stunning and surprise victory for whistleblowers. It started in December 2020 when Congress released the Conference Committee report on the National Defense Authorization Act ...
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On December 23, Congress passed the Anti-Money Laundering (AML) Whistleblower Improvement Act. The Act establishes an effective whistleblower program covering individuals disclosing both money laundering and sanctions-busting violations. Given its transnational reach, it promises to revolutionize the United States’ global anti-corruption efforts. “This law is the most important transnational anti-corruption law ...
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