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AMLA Expands Treasury’s Ability to Fight Money Laundering

Wick Sollers, Daniel Cochran Sale, Christina Kung, and Kelli Gulite

AMLA Expands Treasury’s Ability to Fight Money Laundering
AlexSava via Getty Images

In the past five years, corporations and banks that violated the anti-money-laundering provisions of the Bank Secrecy Act (BSA) paid over $1 billion in criminal fines and penalties. The recently enacted U.S. Anti-Money Laundering Act 2020 (AMLA) drastically broadens the mandate of the BSA and its enforcer, the U.S. Treasury Department’s Financial Crimes Enforcement Network (FinCEN). The AMLA may lead to a surge of BSA enforcement actions and result in even greater monetary penalties.

The transformation of FinCEN’s whistleblower program under the AMLA’s new legal framework is central to FinCEN’s ability to intensify enforcement. Previously, the law governing BSA whistleblowers was limited to four brief provisions of the BSA and capped potential rewards at $150,000 (See 31 U.S. Code § 5328). The AMLA, however, calls for the Treasury Department to create a robust whistleblower program and promulgate new rules to incentivize informants to come forward with independent knowledge of wrongdoing (See AMLA § 6314).

The greatest incentive to potential whistleblowers is the removal of the $150,000 cap on rewards. The AMLA now allows the Treasury to grant awards of up to 30 percent of the monetary penalties assessed when the whistleblower’s aid and information leads to a judicial or administrative enforcement action that exceeds $1 million in penalties. With this change, the size of potential rewards under the BSA is now on par with those of the False Claims Act, which itself has provided some of the largest whistleblower awards in recent history.

While the AMLA outlines certain limitations on whistleblower eligibility, the size of the awards that could be granted under this new regime is extraordinary. Considering that $1 billion was paid in criminal penalties by violators of the BSA in the past five years and 30 percent of these penalty amounts are now up for grabs, there is tremendous incentive for employees and plaintiffs’ attorneys to bring complaints forward.

In addition to potentially record-breaking whistleblower rewards, recent history suggests that the expansion of whistleblower programs can lead to a significant increase in the number and intensity of enforcement actions. Since the Dodd–Frank Wall Street Reform and Consumer Protection Act revamped the whistleblower program at the Securities and Exchange Commission (SEC) in 2011, the number of tips the SEC receives each year has more than doubled. Since 2011, over $700 million has been awarded to over 100 whistleblowers, who collectively provided information leading to over 80 enforcement actions that resulted in more than $2.5 billion in financial remedies. Similarly, since the Internal Revenue Service (IRS) opened its Whistleblower Office in 2007, it has granted over $1.01 billion in awards to 567 whistleblowers. Both programs were undoubtedly spurred on by the success of the False Claims Act, which was used to obtain more than $2.2 billion in settlements for the Department of Justice in 2020 alone. Over 70 percent of those settlements were obtained with the assistance of whistleblowers.

Certainly, increased enforcement and harsher penalties are what Congress had in mind when drafting the whistleblower reform provisions of the AMLA. Senator Sherrod Brown, one of the co-sponsors of the AMLA, provided some insight into how these reforms might be put into practice. He said in a statement shortly before the AMLA was passed,

We need to strengthen, reform, and update our nation’s anti-money laundering laws, and put an end to abuses by criminals of anonymous shell companies—these reforms are long overdue. Updating and strengthening our money laundering and corporate transparency laws and insisting on tighter enforcement will finally provide for a 21st-century system to combat money laundering-related financial crimes, estimated by Treasury to generate about $300 billion per year in illicit proceeds.

Judging by the sheer amount of money at stake, the AMLA has the potential to overhaul anti-money-laundering enforcement and the compliance procedures of the financial institutions and corporations subject to the BSA. The Treasury Department is expected to promulgate the final regulations implementing the AMLA and establishing the reformed whistleblower program in the near future. In the meantime, those subject to the BSA should review internal compliance policies and take other precautions to avoid the impending crackdown.