Whistleblowers Catch Banks Continuing to Launder Money Even After Flags

A whistleblower recently leaked data from Credit Suisse revealing that the bank opened accounts for and served numerous individuals with criminal ties, including sanctioned businessmen and human rights abusers. The leaked data includes information on more than 18,000 bank accounts, collectively holding more than $100 billion. It has increased scrutiny of the Swiss banking system and has renewed calls for stronger anti-money laundering laws.

According to the New York Times, “among the biggest revelations is that Credit Suisse continued to do business with customers even after bank officials flagged suspicious activity involving their finances.” The Times reports that these customers included multiple individuals “accused of being involved in a wide-ranging conspiracy surrounding Venezuela’s oil company” and “a Zimbabwean businessman who was sanctioned by U.S. and European authorities for his ties to the government of the country’s longtime president, Robert Mugabe.”

A little over a year ago, the U.S. Congress recognized the important role whistleblowers can play in anti-money laundering efforts when it passed the whistleblower reward provisions of the Anti-Money Laundering Act of 2020 (AML Act). The AML Act’s whistleblower provisions established a whistleblower reward system modeled off the highly successful SEC and CFTC Whistleblower Programs in order to better incentivize and reward whistleblowers who expose money laundering violations.

According to whistleblower advocates, however, the AML Act contains serious loopholeswhich undermine its effectiveness and have led to the faltering start for the whistleblower reward program. Loopholes highlighted by whistleblower advocates include the lack of a mandatory minimum award, the lack of an independent fund to finance awards, and the exclusion of all employees at FDIC insured financial institutions and credit unions from coverage under the law’s anti-retaliation provisions.

In response to these concerns, Senators Charles Grassley (R-IA) and Raphael Warnock (D-GA) are cosponsoring Senate Bill 3316. The bill mandates that qualified whistleblowers receive an award of at least 10% of the sanctions collected in connection with their disclosure. This is the same procedure outlined in the Dodd-Frank Act, which created the highly successful SEC Whistleblower Program. The bill also establishes a special fund for whistleblower awards which would be fully financed through monies paid by sanctioned fraudsters. The Dodd-Frank Act established an identical fund for the SEC Whistleblower Program.

Grassley and Warnock’s bill is widely supported by whistleblower advocates. In November 2021, a coalition of whistleblower advocacy groups sent a letter to Congress calling for the passage of the bill. According to the groups, the bill’s reforms “are absolutely essential to make the AML whistleblower law function as a critical tool for fighting money laundering.”

The Treasury Department is currently drafting proposed rules for the AML whistleblower reward program. According to whistleblower advocates, this is an opportunity to strengthen the program, despite the shortcomings in the AML Act. Earlier in February, leading whistleblower attorney Stephen M. Kohn of Kohn, Kohn & Colapinto outlined actions the Treasury Department can take in its rulemaking to “to help ensure the success of the AML whistleblower program.” These include creating strict deadlines for making award decisions, permitting an internal administrative appeal whenever a reward is denied, and establishing a user-friendly whistleblower office with an information website.

The Credit Suisse leak, like the Pandora Papers before it, is reinvigorating calls for stronger transnational anti-corruption programs. According to Kohn, “the Treasury Department must take advantage of the AML Act to administratively design the most effective transnational anti-money laundering whistleblower program consistent with the official United States Strategy to Countering Corruption.”

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