In January 2021, Congress took a momentous step in fighting global money laundering by passing the Anti-Money Laundering Act of 2020 (AML Act). The AML Act established a whistleblower award program for insiders disclosing money laundering violations to the U.S. authorities. Modeled off the Dodd-Frank Act, the AML Act was meant to revolutionize the enforcement of money laundering in the same way the U.S. Securities and Exchange Commission (SEC) Whistleblower Program has revolutionized securities enforcement.
However, the AML Act’s whistleblower provisions differed from the Dodd-Frank Act in two key and highly detrimental ways. The AML Act does not include a mandatory minimum award payment for whistleblowers. This means that all whistleblower awards under the program are discretionary. Furthermore, the AML Act did not establish a fund to pay for whistleblower awards, meaning that it relies on yearly appropriations for Congress. Other modern whistleblower award programs have funds for whistleblower awards which are entirely financed through sanctions obtained thanks to whistleblowers.
From the beginning whistleblower advocates warned that these loopholes would undermine an AML whistleblower program, and they have proven to be right. The Wall Street Journal reported that the agency was off to a slow start as whistleblower and whistleblower attorneys were reluctant to come forward without the guarantee of awards. Meanwhile, in fiscal year 2021, the SEC Whistleblower Program had a record year, receiving over 12,000 tips and awarding over $500 million to whistleblowers.
There is no reason the AML Whistleblower Program could not have as much an impact as the SEC Whistleblower Program, if Congress amended the legislation to be in line with the Dodd-Frank Act. Luckily, bipartisan bills are pending in both the Senate and the House which offer the needed reforms.
Congress must act now to pass these essential pieces of legislation. In the House, H.R. 7195, sponsored by Representatives Alma Adams (D-N.C.) and Anthony Gonzalez (R-OH), was unanimously approved by the House Financial Services Committee. The Senate companion bill, S.3316, is cosponsored by Senators Chuck Grassley (R-IA), Raphael Warnock (D-GA) and Elizabeth Warren (D-MA).
By passing the AML Act, Congress demonstrated its intent to leverage whistleblower awards to fight money laundering. In order for the law to be successful, however, Congress must act swiftly and pass the reforms. The urgency of these reforms has been heightened by Russia’s invasion of Ukraine, as money laundering has padded the pockets of Russian oligarchs and helped fund Putin’s war machine.