Money Laundering and Economic Sanctions
Money laundering is the illicit process of concealing or disguising proceeds of criminal activities, such as drug trafficking, bank fraud, or health care fraud, through bank deposits or other financial transactions. The funds originating from criminal activities are initially considered illegitimate or “dirty.” The money laundering process legitimizes them, making them appear “clean.” U.S. law requires financial institutions to have robust anti-money laundering policies and practices to identify and thwart such activities.
The Bank Secrecy Act (BSA) is a set of U.S. laws that require money services businesses, financial institutions, and certain other businesses to accurately record and report categories of financial transactions. The BSA includes what are called ‘Know Your Customer’ regulations. These regulations require institutions and money service businesses to obtain and maintain accurate information on their customers’ identities. In addition, the BSA requires institutions to identify and report suspicious activities. Many types of businesses must also report cash transactions above $10,000.
Economic Sanctions are commercial or financial penalties imposed by the U.S. against countries, groups, or individuals. Prominent forms of economic sanctions include special customs tariffs and duties, arms embargoes, asset freezes, and restrictions on financial transactions. Disguising or concealing monies made from violating economic sanctions can also violate federal money laundering laws.
Despite the substantial safeguards in place to prevent money laundering and enforce economic sanctions, it is estimated that $2 trillion is laundered globally each year. To help counter this, the federal government has enacted programs to reward courageous whistleblowers who report those who enable the laundering of ill-gotten gains.
Overview of the AMLA Whistleblower Program
In 2021, the United States significantly advanced anti-money laundering enforcement with the establishment of the AMLA whistleblower program. This program is integrated into the Anti-Money Laundering Act of 2020 (AMLA). It includes rewards for whistleblowers who report violations of the BSA, the primary law governing AMLA enforcement. In 2022, the amendments extended the program’s scope to encompass whistleblowers with information on sanctions violations. The amendments also strengthened the confidentiality and anti-retaliation provisions for whistleblowers.
Notably, the program covers wrongdoing committed before its inception. As such, a whistleblower may report violations of the BSA or sanctions laws that occurred anytime within the applicable statute of limitations period for government enforcement actions. In addition, AMLA laws extend beyond domestic companies, encompassing a broad spectrum of entities and activities.
Under the AMLA whistleblower program, whistleblowers who provide information leading to at least $1 million in monetary sanctions can be eligible for a reward of between 10% and 30%.
Types of Actions for Violations of the Bank Secrecy Act
The Financial Crimes Enforcement Network (FinCEN), a branch of the Department of the Treasury, is responsible for enforcing the BSA. It can initiate enforcement actions for monetary penalties and civil remedies either through federal court proceedings or administrative processes. FinCEN collaborates regularly with the Department of Justice and federal regulators such as the SEC and CFTC in enforcing the BSA.
Some potential violations of the Bank Secrecy Act are:
- Ineffective overall compliance programs within covered financial institutions or money services businesses;
- Failures related to specific components or “pillars” of compliance programs; or,
- Systemic and recurring noncompliance with BSA requirements.
FinCEN can and does impose substantial financial penalties on money services businesses and financial institutions. The pursuit of BSA violations by FinCEN and other enforcement agencies depends on various factors, including the nature and severity of the violations, their impact on the financial system, the prevalence of wrongdoing within an entity, any history of similar violations, and the financial gains resulting from the violations.
Types of Actions for Sanctions Violations
The Office of Foreign Assets Control (OFAC), a branch of the Department of the Treasury, is tasked with enforcing the laws governing many economic sanctions. OFAC collaborates closely with various government entities, including the Department of Justice, to ensure stringent adherence to these laws.
U.S. sanctions regulations are not consolidated in a single source. Instead, the U.S. has multiple laws governing the operation of sanctions. Laundering proceeds from customs fraud, violations of the Export Administration Act, or the Arms Export Control Act are prohibited under U.S. money laundering laws. The recently expanded Anti-Money Laundering program now empowers whistleblowers to report information related to violations of:
- International Emergency Economic Powers Act (50 U.S.C. § 1701 et seq.);
- Trading with the Enemy Act (50 U.S.C. § 4305, 4312); and,
- Foreign Narcotics Kingpin Designation Act (21 U.S.C. § 1901 et seq.).
Some common violations of these laws and relevant regulations are:
- Companies engaging in transactions with sanctioned entities or entities from sanctioned countries.
- Companies permitting sanctioned entities to conduct business using their tools or systems.
- Businesses lacking an effective overall compliance program to prevent transactions with sanctioned entities.
- Systemic and recurrent noncompliance with fundamental sanctions rules and requirements.
We Help Whistleblowers File Successful Claims
Whistleblower Law Collaborative LLC, based in Boston, devotes its practice entirely to representing clients nationwide in bringing actions under the federal and state whistleblower laws and programs, including the AMLA Whistleblower Program. If you are aware of AMLA violations, sanctions or export control violations, or other types of fraud, contact us for a free, confidential consultation.