The Consolidated Appropriations Act, 2023 amended the Bank Secrecy Act’s whistleblower provisions, setting a floor on the monetary award a whistleblower may receive, allowing whistleblowers to receive awards relating to successful enforcement of certain economic sanctions statutes such as the International Emergency Economic Powers Act, and establishing a fund from which to pay whistleblowers.  Following the increased maximum recovery amount and expanded protection against retaliation that were part of 2020 amendments to the Bank Secrecy Act (“BSA”), the establishment of a minimum recovery amount and expansion of covered judicial or administrative actions provide individuals additional encouragement to report alleged violations.  In turn, this could result in more BSA and economic sanctions investigations and enforcement actions.

Background

Section 5323 of the BSA provides for whistleblower incentives and protections.[1]  Congress added Section 5323 in 1984, allowing the Secretary of the Treasury to pay awards to individuals who provided original information leading to a recovery of a criminal fine, civil penalty or forfeiture, which exceeded $50,000, for violating Chapter 53 of the U.S. Code.[2]  The 1984 amendment that created Section 5323 allowed the Secretary to determine the amount of the award, but capped any award at no more than 25 percent of the net amount of the fine, penalty, or forfeiture collected, or $150,000, whichever was less. 

The Anti-Money Laundering Act of 2020 (“the AMLA”), part of the National Defense Authorization Act for Fiscal Year 2021, significantly expanded Section 5323.[3]  Section 5323 was amended to apply to judicial or administrative actions brought by the Secretary or the Attorney General under subchapter II (the BSA) or subchapter III of Chapter 53 that result in monetary sanctions exceeding $1,000,000.  The AMLA’s amendments increased the potential award amount and added provisions protecting whistleblowers against retaliation.[4]  Specifically, the AMLA amended Section 5323 to allow whistleblowers to recover an aggregate amount equal to not more than 30 percent, in total, of what the government collected of monetary sanctions imposed in the relevant action or related actions, and removed the $150,000 cap.

Continued Expansion of Section 5323

The Consolidated Appropriations Act further amended Section 5323 by creating a minimum whistleblower award amount of “not less than 10 percent, in total, of what has been collected of the monetary sanctions imposed in the action or related actions,” and left in the cap of not more than 30 percent.[5]  It also amended Section 5323 by noting that any award payments shall come from a fund to be established by the Treasury.  This revolving fund will be known as the Financial Integrity Fund (“Fund”) and will be available to the Secretary for payment of whistleblower awards.  The new provisions require the deposit or credit into the Fund of an amount equal to any monetary sanctions collected by the Secretary or Attorney General in certain judicial or administrative actions under specified statutes.  The Secretary of the Treasury is permitted to invest the portion of the Fund that is not required to meet the current needs. 

A final key amendment to Section 5323 relates to the law’s definition of “covered judicial or administrative action,” or the types of actions for which a whistleblower may recover an award.  In addition to the BSA, the definition now includes Chapter 35 (International Emergency Economic Powers Act (“IEEPA”)) of Title 50; sections 4305 and 4312 (Trading with the Enemy Act) of Title 50; and the Foreign Narcotics Kingpin Designation Act.  These statutes impose economic restrictive measures, or economic sanctions, and are primarily enforced by Treasury’s Office of Foreign Assets Control (“OFAC”) and the Department of Justice.  The Deputy Attorney General referred in June 2022 to a “new level of intensity and commitment to sanctions enforcement,” describing sanctions as the “new FCPA.”

The creation of the 10 percent minimum recovery echoes the Securities and Exchange Commission’s (“SEC”) range of available awards for securities law whistleblowers, which is between 10 percent and 30 percent of the money collected.  The SEC has awarded more than $1 billion to whistleblowers since the inception of the program in 2011.  In FY 2022 alone, the SEC awarded approximately $229 million in 103 awards, making FY 2022 the SEC’s second highest year both in terms of dollar amounts and number of awards.  This included an award of more than $37 million to a whistleblower in December 2022, which is one of the top ten awards issued by the SEC.  In 2022, the SEC also received 12,300 tips, the largest number of whistleblower tips in a fiscal year.  The Chief of the Office of the Whistleblower opined that the increases in tips and awards since the program’s inception shows that the program is effectively incentivizing whistleblowers to come forward with information about potential securities law violations. 

With the new minimum award, as well as the expansion of covered actions to include economic sanctions, whistleblowing under Section 5323 could see an increase similar to what the SEC has experienced.  The Enforcement and Compliance Division of the Financial Crimes Enforcement Network (“FinCEN”), a bureau of the U.S. Department of the Treasury that exercises regulatory and enforcement functions primarily under the BSA, is implementing the AMLA’s whistleblower provisions. In March 2022, FinCEN’s acting director, Himamauli Das, noted that FinCEN – despite lacking funding for the program, an issue now potentially resolved with the creation of the Financial Integrity Fund[6] – had already taken steps to implement the BSA’s whistleblower provisions.  Such steps included the creation of an Office of the Whistleblower; hiring personnel to build and lead the program; and drafting regulations to implement the whistleblower provisions of the AMLA.  Acting Director Das described FinCEN’s whistleblower program as a financial institution’s “fourth line of defense” – following its business lines, compliance department and auditors – and anticipated that the program will “incentivize individuals to share valuable information and significantly contribute to FinCEN’s compliance and enforcement efforts.”    

[1] 31 U.S.C. § 5323.

[2] Pub.L. 98-473, Title II, § 901(e), Oct. 12, 1984, 98 Stat. 2135.  Chapter 53 includes, among other provisions, the legislative framework that is commonly referred to as the “Bank Secrecy Act” (BSA).  The BSA requires U.S. financial institutions to assist U.S. government agencies to detect and prevent money laundering.

[3] Pub.L. 116-283, Div. F, Title LXIII, § 6314(a), Jan. 1, 2021, 134 Stat. 4598.

[4] The AMLA also repealed 31 U.S.C. § 5328, a prior whistleblower protection provision.  See Pub. L. 102–550, title XV, §1563(a), Oct. 28, 1992, 106 Stat. 4072.  Note: the BSA’s whistleblower protection provisions do not apply with respect to any employer that is subject to section 33 of the Federal Deposit Insurance Act (12 U.S.C. 1831j) or section 213 or 214 of the Federal Credit Union Act (12 U.S.C. 1790b, 1790c).  31 U.S.C. § 5323(g)(6).

[5] H.R. 2617-1078 (Division AA, Title IV – Anti-Money Laundering Whistleblower Improvement).

[6] There are certain restrictions on the Fund.  Specifically, it “shall not be available to pay any personnel or administrative expenses.”  H.R. 2617-1079.