A Focus on the BSA/AML Whistleblower Provisions

paper whistleblower on wooden background
By Kristin Johnstone

3 minutes

Incentives and protections for whistleblowers encourage disclosure with some exceptions.

This blog is reprinted with permission from the original

We are all aware of the great changes that have been occurring over the last couple of years. There have been many changes to our lifestyles, changes to our working environments, and it is true that banking regulations have not been excluded from change as well.

Today I’ll focus on a specific change and give a little insight into a particular area of the Anti-Money Laundering Act of 2020: the new whistleblower provisions. These provisions are not new; however, they have undergone revision to increase incentivization, and they deserve some attention as these changes may impact your institution.

Incentives for Whistleblowers

The whistleblower provisions were enacted with the goal to incent employees of financial institutions to take any information on Bank Secrecy Act violations either to their employer or to the federal government and furthermore protects these individuals from any retaliation.

What kind of incentives are we talking about here? Under new revision, whistleblowers can be awarded up to 30% of the resulting monetary sanctions obtained for the information brought to the government if those sanctions exceed $1 million. This is a significant increase to the prior whistleblower provision, which topped out at $150,000. 

The other major change with the monetary aspect of this provision is that previously the wording was that the Treasury “may pay” an award for information. With the AML Act of 2020, this has been changed to “shall pay,” taking this award from discretionary to guaranteed.

The percentage paid out depends on the significance of the information provided, the level of assistance provided and the Treasury’s interest in deterring the type of activity that is disclosed. Other conditions include that the information must lead to enforcement action that is successful, that the information is given voluntarily, and that the Treasury and/or the Department of Justice must not have this knowledge from any other sources, including audits. They are looking for independent knowledge of the whistleblower; otherwise it isn’t worth the payout.

Protection for Whistleblowers

The second part of the new Provisions is the way whistleblowers will be protected from potential retaliation. Employers will be prohibited under the rules of the Occupational Safety and Health Administration from retaliating by discharge, demotion, suspension, threatening, blacklisting, harassing or any other acts of discrimination. If any of these things is done to them, the whistleblower will be allowed to file a complaint with the U.S. Secretary of Labor. If this complaint is not acted upon within 180 days, the whistleblower will be permitted to file suit against the employer in federal district court.

Whistleblower Exceptions

There are some exceptions to the provisions. As stated above, information that is “exclusively derived” from an audit is excluded. Also, whistleblowers who are convicted of criminal offenses relating to the AML enforcement action or who failed to submit their information via the proper forms will be excluded. Any government employee who obtains the information during the normal course of their duties, including an employee of the Department of Justice or the Treasury, any applicable regulatory agency or a member of law enforcement, will be excluded as well.

In conclusion, these updates have created a safe and potentially profitable method for employees to report violations to governmental agencies and this should put even more emphasis on your institution to remain aware of what those violations are and how to avoid them. 

Kristin Johnstone is compliance adviser at Vala Secure

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