New AML whistleblower rule is a game-changer for implementing sanctions against Russia.
A new whistleblower law was passed by the US Congress as one of its last actions of 2022.
The ability of US law enforcement agencies to locate assets owned by Russian oligarchs and sanctioned businesses will be directly impacted by the Anti-Money Laundering (AML) Whistleblower Improvement Act, which the author's firm actively advocated.
The AML Whistleblower Improvement Act's approval was motivated by the opportunity to use it right away to enforce all financial sanctions imposed on Russia during the invasion of Ukraine, even though it generally encompasses violations of money laundering and sanctions laws.
On December 29, 2022, President Biden tacked the whistleblower statute onto the Omnibus Budget Bill at the last minute.
It was one of the few non-budget items in the bmassive end-of-the-year federal spending bill.
One of the main targets of the new law, according to Senator Charles Grassley, the bill's principal sponsor, was Russia. He said as much in a press release on December 8, 2022: "Given the expansive sanctions we’ve implemented on Russia as they wage an unjust war in Ukraine, our legislation is urgently needed to hold bad actors accountable."
"The bipartisan, bicameral proposal expands on an anti-money laundering whistleblower program by adding support for whistleblowers who report violations of US sanction laws, providing a funding mechanism to pay whistleblower awards and guaranteeing that whistleblowers will be paid a minimum award amount," said senator Grassley further explaining why the Congress was acting during a "lame duck" session to quickly pass the whistleblower rule.
How does the new law function? Why will it include sanctions against Russia and other unethical practices?
- Whistleblowers who disclose violations of sanctions laws or money laundering will now be eligible for required financial awards for the first time under US law.
Regardless of the size of the reward, a qualified whistleblower is required to receive a payment of between 10% and 30% of any censure, fine, or penalty resulting from their revelations. Whistleblowers frequently receive considerably over $1M (€924K) in compensation for their information and services under rules comparable to these.
- Whistleblowers now have the option to confidentially and anonymously report sanctions violations under US law.
- The law is transnational. Any person from any country can employ its processes and become eligible for financial incentives. Russian, Chinese, and European citizens all have the same access to submit private claims and receive large financial rewards for informing authorities about money laundering and sanctions violations.
- Whistleblowers who disclose hidden assets, bank accounts, or property owned by Russian corporations or oligarchs in the United States or other nations are expressly covered by the new law.
- The anti-money laundering measures allow informants to expose financial institutions and banks that helped Russians launder money or use their assets to circumvent sanctions.
The AML Whistleblower Improvement Act's capacity to reward informants from within Russia and from its trading partners is its hidden gem and most important update.
Given the law's global reach, people of nations who do business or have financial ties to Russia will be able to report suspicious activity and assist US authorities in seizing Russian assets in a secure and effective manner.
Here is what we can anticipate.
The extremely effective Dodd-Frank Act served as the model for the AML Improvement Act. A transnational whistleblower law that addresses foreign bribery was established by Dodd-Frank.
Dodd-Frank is already being used by thousands of non-Americans, including individuals in Russia and China, to report violations of the Foreign Corrupt Practices Act, commodity market fraud, and securities law. Under the Dodd-Frank law, non-U.S. citizens have gotten multimillion dollar incentives.
The Dodd-Frank confidentiality and reward clauses are incorporated into the law to give whistleblowers considerable incentives to disclose money laundering and sanctions-busting.
It enables informants, including anti-corruption campaigners from Europe, Russia, and China, to report Russian money laundering and sanctions-busting in a secure manner and to significantly contribute to the financial reaction to Russia's invasion of Ukraine.
According to the SEC Whistleblower Office's Annual Report for Fiscal Year 2022, whistleblowers have already received over $1.3 billion in awards under Dodd-Frank and have made wrongdoers and criminals pay over $6 billion in fines, penalties, and sanctions.
Qualified whistleblowers who report money laundering or sanctions-busting can now use the same mechanism.
The AML Whistleblower Improvement Act was designed by Congress as a mechanism that a "insider" with information of money laundering or sanctions-busting, whether inside Russia or other nations with relations to Russia, might employ.
By fLEXI tEAM