A two-year campaign to create an effective law incentivizing whistleblowers to report money laundering and sanctions busting has ended with a stunning and surprise victory for whistleblowers. It started in December 2020 when Congress released the Conference Committee report on the National Defense Authorization Act (NDAA). The report contained a whistleblower law for AML violations. Initially greeted with strong praise, a leading expert in whistleblower law pointed out the law was full of loopholes, dangerously misleading, and would utterly fail. A December 7, 2020 column in The Hill said it all: “Big Banks get at Big Break in Pending Whistleblower Law.” On January 1, 2021, the banks won, and the whistleblowers lost. The flawed AML bill became law.
Time proved the expert was right; the law was a complete flop. The reason was simple. On the one hand, the NDAA-based Anti-Money Laundering law looked on its face similar to the highly effective Dodd-Frank Act. The cornerstone of the NDAA whistleblower law was a reward provision permitting the Secretary of Treasury to pay whistleblowers “up to” 30% of sanctions obtained. But whistleblower law experts pointed out that this reward provision was a trap and that glaring loopholes “doomed” the law. In fact, no rewards could be paid under the law. The reason was twofold. First, any payment was purely discretionary. The Secretary of Treasury could deny a whistleblower a reward, regardless of the quality of information or sacrifice, with no judicial review of that denial.
Second, and far worse, the law provided no means to pay whistleblowers. Unlike Dodd-Frank, which created a revolving fund to compensate whistleblowers directly from the sanctions obtained from whistleblower-triggered cases, the law created no such fund for AML whistleblowers. Congress never allocated any money whatsoever to pay awards. Monies obtained from whistleblower-generated cases could not be used to compensate the whistleblowers, regardless of what retaliation they faced. Simply stated, it was impossible for Treasury to pay one whistleblower one red cent. The law fell flat on its face, whistleblowers refused to use it, and not one reward was paid during its two years of operation. The officials within the Treasury department admitted as much.
At best, the law was highly misleading, as whistleblowers may have thought they could obtain compensation. When in fact, such compensation was impossible, as Congress allocated no money to pay these courageous whistleblowers. And whistleblowers who were denied compensation had no legal right to complain.
As early as January 2021, whistleblower experts started to push Congress to fix this mess. Senators Charles Grassley (R-Iowa) and Raphael Warnock (D-Ga) were the first to act. On December 6, 2021, they introduced S. 3016, which contained fixes to these two deadly loopholes. Thereafter, the House introduced a companion bi-partisan bill sponsored by Representatives Alma Adams (D-NC) and Anthony Gonzalez (R-OH). Momentum formed to pass the law, and the House Financial Services Committee unanimously approved the reform measures and sent H.R. 7195 to the full House for approval.
In the House Report endorsing the bill, the Financial Services Committee expressed alarm that whistleblowers were not using the existing, highly flawed law. Quoting a letter from the National Whistleblower Center, the Committee explained:
“It is highly unlikely that persons with relevant information relating to illegal money laundering and financing terrorism will risk their livelihoods, reputations and the potential of high litigation costs without reasonable financial assurances.'' Further, without a guaranteed fee-covering incentive, it was reported that lawyers who specialize in representing potential whistleblowers were declining the cases.”
The House Financial Services Committee added a new provision to the bill, explicitly providing whistleblower protections for individuals reporting violations of U.S. sanctions laws. Although the sanctions-busting provisions of the law applied to all countries, such as Iran and North Korea, the real target of this much-needed provision was Russia. Congress wanted to arm whistleblowers to combat Russian money laundering, sanctions-busting, and to aid the U.S. government in tracking down the wealth of sanctioned Russian oligarchs.
As the midterm elections drew near, it appeared as if the AML reform efforts would fail. Time was short, and the bill could not get a vote on the House floor. Another article in The Hill explained how the bill would aid in fighting Russian corruption, and urged Congressional action. But nothing would occur until Congress entered the lame-duck session. Under Senator Charles Grassley's leadership and full bi-partisan support within the Senate Banking Committee (including new co-sponsors, Senators Elizabeth Warren and Catherine Cortez Masto), the Senate unanimously passed the Grassley-Warnock reforms. Renewed momentum to pass the bill started to boil over. All eyes turned to the House. The message was clear. As Congress fought over the billions in the federal budget, “The most important anti-corruption bill” hung “in the balance.” Grassroots activism was desperately needed to save the AML reforms and pressure Congress to include the whistleblower provisions in the final legislative actions during the lame duck session.
A massive grassroots campaign followed, urging the House Appropriations Committee to consent to have the AML whistleblower bill included in the end-of-the-year Omnibus Budget Act. At a time when nearly every lobbyist in Washington was working on getting their pet projects included. Thousands of whistleblowers and their supporters pursued a phone call and writing campaign to push Congress to protect the AML whistleblowers. Articles from highly respected former FBI whistleblowers and an opinion column by a whistleblower attorney-expert in The Hill strongly urged the House to act. They pointed out how whistleblowers could use the reform law to successfully fight Russian corruption, enforce sanctions and stop money laundering.
The campaign worked. Somehow the voices of the whistleblowers and their supporters were heard above those of the lobbyists. The AML whistleblower law was included in the Omnibus and is now becoming law. Although Capitol Hill insiders were shocked at the strength of the public outcry, a 2020 poll conducted by Marist should have warned political leaders about the outcome of the grassroots campaign. The Marist Poll found that voters from every geographic region and every political party overwhelmingly wanted to see stronger whistleblowers laws (80%). Moreover, the poll revealed that one-in-four “likely voters” stated that a candidate’s position on whistleblowing would impact their voting decision.
On December 23, 2022, Congress agreed to include the AML Whistleblower Improvement Act as part of the Omnibus Budget signed into law by President Biden. A new era of robust transnational whistleblower protections commenced. Whistleblowers from around the world now have a pathway to combat corruption effectively. For the first time in history, whistleblowers from any country have the right to anonymously and confidentially report money laundering and sanctions-busting to the U.S. Departments of Justice or Treasury. If their information results in a successful prosecution, they could receive between 10-30% of the sanctions obtained by the wrongdoers.
Under this law, Russian oligarchs who secreted their wealth in Western Banks or New York real estate should find no peace. But the whistleblowers who risk so much to do the right thing will, for the first time, be able to obtain justice.
To learn more about the campaign to pass the AML Whistleblower Improvement Act, watch Whistleblower Network News’ “Whistleblower of the Week” podcast hosted by Jane Turner.
