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Clifford Chance

Clifford Chance

Regulatory Investigations and Financial Crime Insights

New AML and kleptocracy-related whistleblowing provisions may accelerate and complicate internal investigation requirements

Bounties in exchange for information included within US AML reforms can apply to informants from anywhere in the world. Among other issues, such incentives may complicate US and EU company compliance with whistleblowing investigation requirements.

Within the National Defense Authorization Act of 2021 ("NDAA") the US Anti-Money Laundering Act of 2020 ("AMLA") requires the Treasury Department to upgrade and systematize rewards programs for potential informants providing original information that leads to the issuance of more than $1 million in penalties for violations of the Bank Secrecy Act. Separately, the NDAA also includes the Kleptocracy Asset Recovery Rewards Act ("KARRA") which creates a program to provide rewards for information leading to the recovery or seizure of assets derived from foreign government corruption.

Neither law specifies applicability only to U.S. citizens. The potential under these laws for incentives to anyone in the world for providing information to the US government may accelerate whistleblowing in several jurisdictions, including the EU. Companies will have to comply with complex requirements on how they handle and investigate whistleblowing, while maintaining required confidentiality and enterprise-wide best practices. Another complexity will be the corporate governance impact of potential monetary incentives in connection with compliance officer responsibilities. Information from overseas whistleblowers may also lead to use of US subpoenas applicable to foreign banks and expanded under other provisions of AMLA. See our full briefing on that topic here.

Section 6314 of AMLA rewrites Section 5323 of the PATRIOT Act with respect to informants for Bank Secrecy Act ("BSA") violations. Section 9703 of KARRA directs the creation of a pilot program for Treasury to reward informants providing information leading to the restraining, seizure, forfeiture or repatriation of stolen assets linked to foreign corruption when such assets are either in an account of a U.S. financial institution, come within the United States, or are in the possession or control of a U.S. person.

Although implementing regulations and procedures need to be crafted to clarify, among other things, how incentives under both programs might apply to compliance officers within the financial sector and other industries, Section 6314 of AMLA specifically notes that a whistleblower can be someone who derives information "as part of the job duties of the individual or individuals." In addition, the AMLA program covers informant disclosures to either their employer or the government, which arguably might lead to rewards for individuals that provide original information via suspicious transaction reporting under U.S. or foreign anti-money laundering requirements. One of the criteria for "original information" is that it be "derived from the independent knowledge or analysis of a whistleblower," which could be difficult to interpret consistently with the language pertaining to job duties. The new BSA whistleblower provisions are modelled on the whistleblower provisions arising after the 2008 financial crisis with respect to securities violations in the Dodd-Frank Act. In implementing that legislation, which included language with respect to "independent knowledge of analysis" but which did not include the "job duties" language, the SEC excluded compliance personnel from the scope of those eligible to benefit from whistleblowing. While Treasury regulations to implement Section 6314 might parallel those of the SEC in other respects, FinCEN will have to address the different statutory language that could apply to compliance officers.

Clifford Chance is able to discuss with clients a number of difficult scenarios they may now face and help them navigate through various internal investigation requirements, confidentiality requirements, worker protection requirements and enterprise-wide governance best practices considering the different, and often conflicting, laws in the jurisdiction(s) where they operate. While all industries are affected by whistleblowing legislation, the financial sector may face added complexity given the variety of circumstances in which financial transaction records may be the basis for an informant seeking a reward from the U.S. Government for information provided under the new NDAA provisions.