Treasury Department Drafting Rules for AML Whistleblower Program

Treasury Department Drafting Rules for AML Whistleblower Program

The U.S. Treasury Department is currently drafting proposed rules to implement the whistleblower provisions of the Anti-Money Laundering (AML) Act of 2020. The rulemaking process’ status was first made public in a Reuters article by leading whistleblower attorney Stephen M. Kohn of Kohn, Kohn & Colapinto. According to Kohn, by drafting strong regulations the Treasury Department can fortify the AML Whistleblower Program, despite shortcomings in the AML Act.

The AML Act became law on January 1, 2021 as part of the massive National Defense Authorization Act. Included in the Act were provisions establishing a whistleblower reward program for individuals who report money laundering violations to U.S. authorities. These provisions, however, included a number of loopholes which whistleblower advocates claim undermine the program. One such loophole is the lack of a mandatory minimum for whistleblower awards.

The Treasury Department is expected to publish proposed rules for the AML whistleblower program sometime this year. The AML Act does not mandate that the Treasury Department enact any regulations, however, and thus there is no deadline for their publication.

According to Kohn, “[t]his rulemaking process provides an opportunity to address shortcomings in the law and also create common sense regulations effectively implementing those aspects of the law that do not need a congressional fix.”

In a new article for JD Supra, Kohn outlines action the Treasury Department can take in its rulemaking to “to help ensure the success of the AML whistleblower program.” Most of the recommendations laid out by Kohn exist in the rules governing other highly successful whistleblower reward programs, such as the SEC’s.

Kohn suggests that the Treasury Department draft a rule creating strict deadlines for making award decisions, and permitting an internal administrative appeal whenever a reward is denied. He explains that “[o]ne of the biggest complaints with whistleblower reward programs is the long delays. A case can languish within an administrative agency for years, and it is not uncommon for an agency to take 2-5 years to make a reward decision.”

Another recommendation Kohn makes is that the Treasury established a user-friendly whistleblower office with an information website. He points to the SEC’s Office of the Whistleblower website as a good working model. “Most potential whistleblowers do not understand their rights, and consequently high-quality publicly available information is always the most important first step for a successful program,” Kohn explains.

Kohn also recommends that the proposed rules “[e]nsure interagency cooperation,” “[e]stablish criteria for granting an award that focuses on incentivizing whistleblowers to provide the U.S. government with high quality information,” “[w]ork directly with the IRS, CFTC, and SEC to assist whistleblowers in qualifying for rewards impacting money laundering under those programs,” and “[w]ork with international organizations and whistleblower advocacy groups to ensure that the rights of individuals to report money laundering crimes are understood outside the United States.”

Kohn notes that while the rulemaking process gives the Treasury Department the opportunity to fortify the AML whistleblower program, legislative reform is still needed to address certain loopholes in the AML Act. According to Kohn “[a] critical first-step in enacting an AML whistleblower law that can work in practice is the bipartisan bill, Senate Bill 3316. The bill fixes the two largest loopholes in the legislation, and would harmonize the law with the highly successful Dodd-Frank Act reward laws.”

Senate Bill 3316 is cosponsored by Senators Charles Grassley (R-IA) and Raphael Warnock (D-GA) and is widely supported by whistleblower advocacy groups.


Treasury Department Rules Could Help Strengthen AML Whistleblower Program | Kohn, Kohn & Colapinto LLP – JDSupra

Whistleblower rewards law: fixing money laundering loopholes | Reuters

More AML Whistleblower News on WNN

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