FinCEN Strengthens the AML Whistleblower Program

The Financial Crimes Enforcement Network anti-money laundering whistleblower program was enacted on Jan 1, 2021. The program was created to receive information and tips related to the violations of the anti-money laundering laws, including,

• Inadequate or weak Know Your Customer (KYC) verification and Customer Due Diligence (CDD) processes
• Failure to report or file suspicious transactions and activities in an account (SAR)
• Ineffective policies, training programs, and enforcement to meet anti-money laundering compliance programs

Under the program, individuals providing information on violations of the Bank Secrecy Act (BSA) were eligible for an award of 30% of the monetary sanctions leading to more than $1 million in fines. However, the program is yet to issue a significant award.

However, with new improvements, congressional changes, and the sustained focus of the FinCEN on filed complaints, the program is now ready to rumble.

Obstacles in the FinCEN AML Whistleblower Program

Although the FinCEN AML whistleblower program started receiving tips and information in October 2021, disclosing information about the violations often involves personal and professional risks. This deters the whistleblowers from coming forward.

In addition, delays in receiving and investigating the received information or tips of AML/BSA violations and lack of minimum rewards for the whistleblowers are some of the key reasons why many lawyers were reluctant to take the anti-money laundering violation cases.

Besides, the whistleblowers are awarded only when the required funds are appropriated by Congress. However, this did not happen since the enactment of FinCEN’s AML Whistleblower program in 2021.

Improvements in the FinCEN’s AML Whistleblower Program

In late 2022, Congress passed the Anti-Money Laundering Whistleblower Improvement Act. The act mandates 10% of the civil penalties as a minimum award for whistleblowers who provides original tips and information. It also features strong protections for whistleblowers.

In addition, Congress created a fund for paying awards to the whistleblower who will receive money recovered from the penalties imposed by the US Treasury Department for BSA/AML violations based on their tips.

The expansion of FinCEN’s whistleblower program also mandates that banks and financial institutions take tips and information seriously and act on them. Besides, whistleblowers are provided with more options to raise an alarm to the various regulators. Thus, potential whistleblowers can now disclose information to FinCEN who previously had nowhere to go.

For example, the Office of Foreign Asset Control invoked IEEPA restricting transactions with large Russian banks and linked individuals in response to the ongoing invasion of Ukraine. Potential whistleblowers can now report banks and financial institutions found violating the restrictions, through branches and correspondent accounts located abroad, to the regulators.

Strengthening the Enforcement Effectiveness

The FinCEN requires banks and financial institutions to implement policies and programs for combating money laundering activities and file reports of suspicious transactions relating to criminal activities to meet the Bank Secrecy Act (BSA) and Anti-Money Laundering (AML) compliance. Failure to comply with the BSA regulations can lead to enormous penalties and a huge incentive for whistleblowers.

With recent changes and improvements in the FinCEN anti-money laundering whistleblower program, financial institutions can expect to receive more complaints and tip-offs regarding fraudulent activities such as money laundering.

In line with the FinCEN directives, they need to take prompt action, including investigative efforts and communication to respond to specific complaints. This could stress the capacity of the in-house financial crime units and result in due diligence lapses.

Having a service partner with hands-on domain expertise in investigating financial crimes can be a game-changing strategy for financial institutions. Through timely and effective redressal, the partner can help banks mitigate risks and maintain compliance with FinCen standards.

At Anaptyss, we leverage our exclusive Digital Knowledge Operations™ framework comprising a tailored, consultative approach, digital solutions, and operation expertise to prevent, detect, and address/rectify violations of anti-money laundering laws.