US Treasury Is Seeking Help from Whistleblowers to Go After Russian Oligarch Wealth

Ever since Russia’s disastrous decision to invade Ukraine, sanctions against President Vladimir Putin’s inner circle have been ramping up, with various federal agencies chasing down assets of individuals known to be financially related to the government.

And the best way to locate these assets, it turns out, is by relying on whistleblowers.

The U.S. Government has recently put a rocket on a heretofore quiet whistleblower award program targeting kleptocrats – announcing a multilateral Russian oligarch taskforce. The effort will be to work with our allies to sanction (including asset freezes, civil and criminal asset seizure) individuals and entities that are in league with and enabling Putin and the Russian government in Russia’s invasion of Ukraine.

As part of that effort, Treasury has announced the “Kleptocracy Asset Recovery Rewards Program” (KARP?) – established in the 2021 Defense Authorization Act and championed by Congressmen Stephen Lynch (D-MA) and Keith Rothfus (R-PA).

The statute authorizes the Secretary of Treasury to offer rewards up to a maximum of $5 million for information leading to the 1) the restraint or seizure; 2) forfeiture; or, 3) repatriation of stolen assets in an account at a US financial institution (including a US branch of a foreign financial institution), that come within the U.S. or that come with the possession or control of any U.S. person.

In particular, the U.S. Government has stated that it seeks information leading to the seizure, restraint, forfeiture, or repatriation of assets linked to corruption involving the government of the Russian Federation that meets the above conditions. The U.S. government has also provided 28 names of Russians that they are particularly interested in receiving information. In addition, FinCen has put out a very helpful overview/list/guide of how the oligarchs are hiding their funds — real estate; luxury goods; high value assets; art, etc. FinCEN Alert Russian Elites High Value Assets.

However, it is important for whistleblowers with information about Oligarchs and Kleptocrats to remember that it is possible they may also be eligible for a (more expansive) award under the IRS Whistleblower program. Thanks to Senator Charles Grassley (R-IA), Congress a few years ago clarified the modern whistleblower law – defining “collected proceeds” under 7623(c) as encompassing the proceeds from laws which the IRS is authorized to administer, enforce or investigate. The IRS Criminal Investigation division is certainly front and center in the U.S. Government’s efforts to go after the kleptocrats and oligarchs. From discussions, the IRS is quite interested in receiving informed, specific information and materials (i.e. documents) about oligarchs and kleptocrats from knowledgeable individuals – especially insiders.

We should hope that the U.S. government will make clear that whistleblowers are eligible for both awards – and use the KARP awards to make quick payments to whistleblowers. The Treasury should strive to announce awards quickly. I give good marks to Treasury and DOJ for trumpeting the importance of whistleblowers and rolling out the red carpet for whistleblowers – most welcome. However, nothing will encourage whistleblowers to come forward more than seeing the KARP making awards – and nothing will rattle the oligarchs and kleptocrats more then seeing KARP awards being made and knowing that they are being dimed out.

Making early KARP awards is especially important given that the IRS informant awards are a long journey; the Government needs to come out with a bang and with dollars to give more whistleblowers the confidence and incentive to come forward. I saw this first-hand with my client Brad Birkenfeld. When Brad received a $104 million dollar award from the IRS for blowing the lid off private Swiss banking, a flood of whistleblowers came forward to assist the IRS in its work and overnight changed the world of private banking upside down.

Lastly, it is important that Congress act quickly to pass the IRS Whistleblower Program Improvement Act – a bipartisan, bicameral bill sponsored by Senate Finance Chairman Ron Wyden (D-OR); Senator Grassley (R-IA) as well as Congressmen Mike Thompson (D-CA) and Mike Kelly (R-PA) in the House. The bill makes some important changes and improvements to the IRS whistleblower program – ensuring whistleblower rights for awards are protected and that the IRS makes awards in a timely manner.

There is no question that passing the IRS Whistleblower Program Improvement Act would encourage these whistleblowers to come forward – and be a key step forward in the fight against the oligarchs and kleptocrats.

For whistleblowers – the U.S. Government is calling.