An anti-money laundering (AML) whistleblower is someone who reports suspicious activity or illicit financial transactions that are in violation of anti-money laws and regulations. AML whistleblowers are typically employees at large financial institutions, such as banks, broker-dealers, or insurance companies, but can also be those who work in close connection with the institution, such as its customers.

AML whistleblowers can be classified according to the channel in which they report suspicious activity. An internal whistleblower is someone who reports activity internally to their employer, and an external whistleblower is someone who reports to regulators or law enforcement agencies.

In many external reporting cases, reports are filed with the Financial Crimes Enforcement Network (FinCEN), which is a bureau within the U.S. Department of the Treasury that collects and analyzes information about financial transactions to combat domestic and international financial crimes, such as money laundering, drug trafficking, and terrorist financing. FinCEN administers the AML and Sanctions Whistleblower Program, which offers monetary awards, anonymous reporting channels, and anti-retaliation protections to AML whistleblowers.

External whistleblowers may also report violations to the Securities and Exchange Commission (SEC), which enforces compliance with aspects of the AML rules by entities regulated by the SEC.

Individuals become AML whistleblowers for many reasons, including:

• Ethical Obligations: Many individuals feel an ethical obligation to report wrongdoing, especially when it involves serious crimes like money laundering that can fund terrorism, drug trafficking, and other illicit activities.
• Protecting the Institution: Whistleblowers may aim to protect their employer from reputational damage, legal penalties, and potential financial losses that could arise from AML violations.
• Preventing Harm to the Public: By reporting suspicious activity, AML whistleblowers can help prevent further harm to the public, which can lead to an erosion of public trust in financial institutions and the disruption of the financial system.
• Financial Incentives: Many jurisdictions offer substantial financial awards to whistleblowers who provide original information that leads to successful enforcement actions against financial institutions.
• Preventing Retaliation: Whistleblower protection laws are in place in many countries to safeguard individuals from retaliation for reporting suspected wrongdoing. These laws can provide significant legal protection for AML whistleblowers.

Whistleblowers may also report violations of the Bank Secrecy Act (BSA), which sets a broad legal framework for combating money laundering. That framework is then implemented pursuant to specific rules and guidance provided by the relevant agencies.

AML whistleblowers are essential in exposing violations and can be awarded generously for their information. Under FinCEN’s Anti-Money Laundering and Sanctions Whistleblower Program, those who report AML or BSA violations can potentially receive an award up to 30% of the fines and penalties resulting from a successful enforcement action. Protection from retaliation and anonymous reporting is also available under this program.

“Whistleblowers have submitted information relating to some of the most pressing policy objectives of the United States, from Iran- and Russia-related sanctions evasion to drug-trafficking to cyber-crimes and corruption. We have received over 270 unique tips since the program’s inception [in 2020], and many of the tips received have been highly relevant to many of Treasury’s top priorities.”

Andrea Gacki
Director of the Financial Crimes Enforcement Network (FinCEN)
SIFMA’s Anti-Money Laundering & Financial Crimes Conference

AML whistleblowers report illegal activity that involves money laundering and the requirements for financial institutions to have processes in place to detect and prevent it. Money laundering is the process of concealing the origin of illegally obtained funds to make them appear legitimate. The U.S Treasury is on the lookout for money laundering, but also the following:

• Internal Controls Violations: Examples include inadequate segregation of duties, insufficient oversight, and system vulnerabilities, which can create significant risks for money laundering within a financial institution.
• Know Your Customer/Customer Due Diligence (KYC/CDD) Failures: This may include insufficient identity verification, background checks on high-risk customers, or failing to conduct enhanced due diligence politically exposed persons (PEPs).
• Transaction Monitoring Failures: This includes the failure to identify and flag suspicious transactions, the failure to monitor high-risk accounts or activities, and a lack of effective response protocols for escalating a case.
• Suspicious Activity Report (SAR) Failures: These reports are needed when they suspect a transaction may be related to money laundering. Failure to file a SAR, providing inaccurate or incomplete information, or failing to investigate a SAR can be considered a violation.
• Compliance Programs: Financial institutions are required to have strong AML policies and procedures and train their employees about suspicious activity. Failure to implement such compliance programs or training can be considered a violation.
• Bribery and Corruption: This may include bribery of public officials to facilitate money laundering, or corruption with the financial institution itself.

AML whistleblowers may also be able to report under other programs, such as the IRS Whistleblower Program which is used to report tax evasion related to money laundering activities, as well as the Dodd-Frank Act, which includes provisions for violations of securities laws, which can overlap with money laundering schemes. Given the complex nature of money laundering and applicability of various laws, it’s always recommended that whistleblowers speak with an attorney to determine their options. In many cases, whistleblower attorneys work on a contingency basis, which means, they only get paid if they help you win your case.

FinCEN, a bureau within the U.S. Department of the Treasury, is tasked with analyzing financial transactions to identify illicit financial activity, such as money laundering.

In 2020, FinCEN launched a Whistleblower Program, which encourages individuals to report violations of the BSA, other FinCEN regulations, and Office of Foreign Assets Control (OFAC) sanctions.

Under this program, individuals who provide FinCEN with information leading to a successful enforcement action can obtain a substantial award, up to 30% of the total sanctions collected. Below is an overview of the program and its features:

• Whistleblower Awards: Whistleblowers who provide FinCEN with information regarding violations of the AML Act, BSA, or sanctions violations may be eligible to receive an award between 10% and 30% of the penalties and fines obtained from a successful investigation in when the penalties and fines total $1 million or more.
• Protection Against Retaliation: Whistleblowers are protected from retaliation for reporting suspected wrongdoing. This means an employer may not terminate, demote, harass, or otherwise take consequential action against a whistleblower for engaging in a protected activity such as whistleblowing.
• Anonymous Reporting: Even though FinCEN adheres to strict confidentiality, AML whistleblowers who utilize the AML whistleblower program are eligible to report their concerns anonymously for an added layer of protection. However, they must do so with the assistance of a U.S-based attorney

By reporting financial crime, AML whistleblowers help bring criminals to justice, which helps strengthen the integrity of the U.S. financial system.

Detecting money laundering can be extremely difficult, as criminals will go to great lengths to conceal their activities or manipulate systems and controls. This is why whistleblowers are so important. Whistleblowers often possess unique insights into an organization’s inner workings, granting them greater access to incriminating evidence and suspicious transactions. This insider knowledge enables investigators to connect the dots and uncover elaborate schemes that might otherwise remain undetected. AML whistleblowers can help strengthen FinCEN ‘s ability to combat financial crime and safeguard the integrity of our financial markets.

Our firm represents Howard Wilkinson, the whistleblower behind a $230 billion money laundering scheme, the largest money laundering case in world history. Howard exposed a scheme that moved rubles out of Russia, converted them to dollars at the Estonian branch of Danske Bank, and then moved the dollars to New York with help from Bank of America, J.P. Morgan, and Deutsche Bank.

If you are seeking legal assistance, look no further than Kohn, Kohn & Colapinto. Get in touch for a free and confidential case evaluation. We don’t get paid unless we help you win your case.