Q: What is the FinCen Whistleblower Award program?
A: The 2020 Anti-Money Laundering Act (AMLA) empowered FinCen, a bureau of the U.S. Department of the Treasury, to establish its own whistleblower program focusing on violations of the Bank Secrecy Act (BSA) which it is charged with enforcing. While FinCen’s current whistleblower program, which started in 2021, formerly was both unfunded and had no lower threshold to its potential awards, thus creating a questionable incentive structure, the Whistleblower Improvement Act, enacted in December of 2022, amended the statute underlying the FinCen whistleblower award and protection law, 31 U.S.C. § 5323, and established both funding for potential awards and a 10%-30% aggregate award framework. Like the SEC and CFTC whistleblower award programs that precede it, the FinCen whistleblower program incentivizes whistleblowers who “voluntarily” submit “original” information that leads to FinCen enforcement actions or certain “related actions” in which over $1,000,000 of sanctions are ordered and paid. The program bears a high degree of similarity to the pre-existing and successful whistleblower award programs already offered by the SEC and CFTC. Nevertheless the FinCen whistleblower program has notable differences in terms of whistleblower award eligibility and whistleblower protections. Recent amendments to the legislation behind the program also expands the coverage of the FinCen whistleblower program to include not just BSA violations but also violations the International Emergency Economic Powers Act, the Foreign Narcotics Kingpin Designation Act and certain provisions of the Trading with the Enemy Act. This wider scope will likely result in future award eligible enforcement actions for not just typical BSA oriented anti-money laundering violations but also violations that involve the evasions of global conflict sanctions.
Q: What are some of the notable differences between FinCen’s whistleblower program and those run by the SEC and CFTC?
A: While the current iteration of FinCen’s whistleblower program is new as of December 2022 and associated regulations have not yet been promulgated, some things are already known. First and unsurprisingly, FinCen’s whistleblower program has notable similarities with those offered by the SEC and CFTC, for instance the confidentiality provisions, award percentage ranges and discretionary factors to be employed by FinCen in determining aggregate award percentages within the 10%-30% band. However, in contrast to the SEC and CFTC whistleblower award programs, FinCen’s whistleblower award program places no limitations on whistleblowers with Compliance and Audit roles. Additionally, if a whistleblower reports internally and the employer later self reports and sanctions are issued and paid, the internal whistleblower may be eligible for an award. On the other hand, FinCen does appear to have a narrower definition of what constitutes information that is “voluntarily” provided, and potentially excludes information that has already been requested of the whistleblower’s employer even if the request was not specifically directed at the whistleblower. Whistleblower protection rules under the AMLA also differ substantially from those under the SEC and CFTC programs and are less comprehensive than those available under Dodd-Frank. For instance, the AMLA’s whistleblower protection provisions currently exclude from their coverage those working at FDIC insured institutions (e.g. most banks) and Federal Credit Unions. 31 U.S. Code § 5323(g)(6). AMLA Whistleblowers who are covered by the AMLA protections are also subject to “administrative exhaustion” requirements which dictate that they must first file any discrimination and retaliation charges with OSHA and do so subject to a short statute of limitations. Subject to further requirements a whistleblower may potentially thereafter bring suit in federal court. 31 U.S. Code § 5323(g)(2).
Q: Can Securities Whistleblower Inc. represent you in bringing whistleblower tips to FinCen if you are located outside of New York, Massachusetts or even outside of the USA?
A: Yes, there are no citizenship or geographic requirements to be eligible to participate in FinCen’s whistleblower program and attorneys licensed to practice in the highest court of any U.S. state are also licensed to practice before federal agencies including FinCen.
Q: What sort of whistleblower tips qualify for potential awards from FinCen?
FinCen’s newest award program has little if any public track record. However, FinCen’s award eligible enforcement actions will likely follow their prior enforcement activity which existed before their current award program was established. Many of these enforcement actions have involved failures by institutions to implement and maintain proper and effective AML and KYC compliance and control programs, for instance: failures to detect or timely review suspicious activity and file SAR’s; failures to file CTR’s; failures to properly identify and keep records of clients and much more. The targets of such recent sanctions have been wide, including, for instance: multi-national financial institutions, cryptocurrency exchanges, precious metal dealers and casinos. The legislative history of the recent amendments to the laws underpinning the FinCen whistleblower program also indicate that future FinCen enforcement activity will now broaden to actors who have potentially enabled or engaged in conflict-oriented sanctions evasions, narcotics dealing and terrorism financing. FinCen has also expressed interest in money laundering and sanctions evasions occurring through transactions involving high value real estate and art.
The below examples are a non-exhaustive sample of the wide range of violations that FinCen has brought enforcement actions over:
- Failure to implement effective AML compliance policies and procedures at Crypto exchanges.
- Failures to implement effective AML compliance programs at banks.
- AML risk management failures at commodity and securities broker-dealers.
- Failures by banks to investigate transactions flagged as suspicious by automated system and failure to file SAR reports.
- Failures to conduct customer due diligence and transaction monitoring at crypto derivatives exchange.
- Failures of crypto currency business to register as a “money services business”.
- Failures by brick and mortar establishments to file CTR’s.
- Failures by casinos to timely file SAR reports.
- Record keeping violations by sports gaming and betting establishment.
For a comprehensive list of FinCen’s recent enforcement activity see https://www.fincen.gov/news-room/enforcement-actions.
Q: Who is eligible for an award under the FinCen whistleblower award program?
A: An individual, or two or more individuals acting jointly, who “voluntarily” provide “original information” not previously known to FinCen, in the manner proscribed, that result in enforcement actions by FinCen (or “related” actions brought by another agency or law enforcement entity) in which over $1,000,000 of sanctions are ordered and paid.
Q: What if any timing issues come into play as regards whistleblower reports to FinCen?
A: The FinCen program provides awards to those who provide “original” information not already known to FinCen or the Department of Justice (DOJ). As a result the first individual (or individuals acting jointly) reporting the malfeasance may result in subsequent and substantially similar whistleblower submissions being deemed unoriginal or already known to FinCen. Similarly, if prior to making their tip, a whistleblower’s employer receives a request for the same information from FinCen or another government or law enforcement agency, the whistleblower’s tip may subsequently be deemed by FinCen to have not been “voluntarily” provided. Additionally, undue delay in reporting potential malfeasance, along with other discretionary factors, may be used by FinCen to reduce any ultimate award within the 10%-30% band.
Q: Can whistleblowers report a violation if they were involved in the underlying violation and still be eligible for an award?
A: Yes. FinCen may make an award to a whistleblower who was involved in the reported malfeasance so long as the whistleblower has not been convicted of a crime related to the judicial or administrative sanctions under which the whistleblower would otherwise be eligible for an award. Similar to the SEC and CFTC whistleblower programs, FinCen nevertheless has the discretion to employ various factors, presumably including a whistleblower’s potential involvement in the reported malfeasance, when determining the size of an award within the 10% and 30% band.
Q: May auditors and compliance officers make award eligible reports to FinCen?
A: Yes. Unlike the whistleblower award programs offered by the SEC and CFTC, FinCen does not currently place restrictions or conditions on the reporting and award eligibility of those in Compliance or Audit roles.
Q: Are US based whistleblowers protected under the AMLA if they report a potential violation of a Treasury law, rule or regulation to FinCen, certain law enforcement and government agencies or internally to their employer?
A: The AMLA does not protect all whistleblowers. For instance the AMLA whistleblower protections currently exclude those who work for institutions subject to the Federal Deposit Insurance Act or section 213 or 214 of the Federal Credit Union Act (12 U.S.C. 1790b, 1790c). This means the AMLA currently does not protect those who work for FDIC insured institutions, i.e., most banks, and also does not protect those who work for federal credit unions. 31 U.S. Code § 5323(g)(6). Those who are protected under the AMLA must also file charges with OSHA within 90 days of learning of the discrimination or retaliation in order maintain these protections as well as their potential right to later seek redress in a federal court. 31 U.S. Code § 5323(g)(2). However, as with the SEC and CFTC programs, to minimize the risks of discrimination and retaliation, whistleblowers may submit award-eligible tips anonymously so long as they do so through an attorney. Subject to certain exceptions, FinCen is also obligated to keep a whistleblower’s identity confidential. 31 U.S. Code § 5323(g)(4).
Q: How does FinCen receive tips related to potential malfeasance?
A: FinCen is currently accepting whistleblower tips and individuals may provide such information directly in writing to FinCen or the DOJ. As with the SEC and CFTC programs whistleblowers may also submit award-eligible tips anonymously so long as they do so through an attorney. At present there is however an absence of the forms (e.g., form TCR and WB-APP), hotlines, public notice pages (a/k/a NOCA’s), etc., characteristic of the more mature whistleblower programs at the SEC and CFTC. This can be expected to change as the program matures and FinCen implements regulations and associated program infrastructure.