By Vince McKnight, Shaun Rosenthal, Erica Roberts, and Savannah Shepherd
The CFTC, SEC, and IRS have robust enforcement programs that have the potential to recover even more substantial funds to pay back the fraud perpetrated on the United States government. However, as we have discussed throughout this series, these programs lack the resources to keep up with fraud, despite their impressive recoveries thus far.
The Anti-Money Laundering (AML) Whistleblower Program is different. Being new, it has the potential to learn from the challenges of these other programs in order to build a robust enforcement system.
AML Has Enforcement Power over Banking Fraud and Sanctions Violations
In 2021, Congress enacted the Anti-Money Laundering Act (AMLA) and established new whistleblower protections and reporting mechanisms for employees of financial services institutions who report fraud related to money laundering. The law was further amended in 2022 by the Anti-Money Laundering Whistleblower Improvement Act. Together, these statutes establish a program for whistleblowers to report money laundering and terrorism financing to the Financial Crimes Enforcement Network (FinCEN), a bureau within the U.S. Department of the Treasury.
Whistleblowers who provide FinCEN with information regarding violations of the AMLA, the Bank Secrecy Act, or sanctions violations of the International Emergency Economic Powers Act, the Trading with the Enemy Act, and the Foreign Narcotics Kingpin Designation Act may be eligible to receive an award.
What is the Scale of Fraud?
The Department of the Treasury reports that the most significant money laundering crimes are linked to fraud, drug trafficking, cybercrime, human trafficking, human smuggling, and corruption.
The United Nations Office on Drugs and Crime estimates that the “amount of money laundered globally in one year is 2% to 5% of global GDP, or $800 billion – $2 trillion in current US dollars.” Additionally, in 2022, the potential loss from fraudulent scams and cyberattacks reported to the FBI was $10.3 billion, which is assumed to underrepresent actual loss.
TD Bank Agreed to Pay $3.1 Billion in Penalties
FinCEN, along with the Department of Justice, the Commodity Futures Trading Commission, and Office of Foreign Assets Control, have enforced anti-money laundering rules and regulations. They are not slowing down their enforcement.
Just this year, in October, the U.S. announced that TD Bank agreed to pay $3.1 billion in penalties for willfully failing to implement and maintain an anti-money laundering program. This is the largest recovery for violating the Bank Secrecy Act in history and also FinCen’s largest recovery (accounting for $1.3 billion of the total settlement).
The AML Whistleblower Program and the Potential for Growth
As mentioned, the AML Whistleblower Program is still in its infancy. As of May 2024, the program had received over 270 unique tips. It is a step in the right direction, but to adequately combat money laundering and terrorism financing, the number of tips needs to drastically increase.
As we described in Part II of this series, it is estimated that corporate fraud costs approximately $800 billion each year. The amount of money laundering is estimated to be anywhere between $800 billion and $2 trillion. But while the SEC whistleblower program received over 18,000 tips in 2023, the AML Whistleblower program received only over 100.
The tips can be against U.S. and non-U.S. companies. Companies that are not incorporated in the United States may still be liable for anti-money laundering and sanctions violations if they transact with users in the United States, use U.S. financial institutions, or otherwise have sufficient contacts in the U.S.
Considering the extent of fraud and the ability for the government to intervene, we expect the AML Whistleblower Program to lead to major recoveries, if its resources and infrastructure are up to the task.
Program Structure and Enforcement Limitations
Similar to all of the enforcement divisions, investing in FinCEN pays for itself. In fiscal year 2023, FinCEN’s budget was approximately $274 million. Its $1.3 billion recovery from TD Bank’s AML violations essentially paid for the program for almost the next five years.
However, the government needs to devote more resources to FinCEN. In 2023, the SEC’s enforcement division had a budget of approximately $690 million, almost three times FinCEN’s budget. Unsurprisingly, the SEC recovered nearly $5 billion in 2023, dwarfing FinCEN’s recovery in the same period.
FinCEN and the Department of Treasury are also working on improving their rules and regulations. FinCEN has yet to create rules for its whistleblower program, and the program must do so before it can pay any whistleblower rewards. It expects to propose AML rules in the next year.
At the same time, the Department of Treasury has recently addressed one of the loopholes in its AML/CFT regulations. Effective January 2026, certain investment advisers will now be included as a “financial institution” under the BSA, subjecting them to anti-money laundering programs, including requiring them to report suspicious activity to FinCEN.
The government must invest in FinCEN, an investment that brings outsized returns, to fight money laundering, enforce sanctions, and combat terrorism.
The program is in its nascent stages, but we are optimistic about its ability to support whistleblowers and recover substantial funds from ill-gotten gains.
If you have information about financial fraud and believe you have a whistleblower claim, please feel free to fill out our online intake form to contact a whistleblower attorney at our firm today.