New AML Whistleblower Provisions: What You Need to Know

Included as part of the 2021 National Defense Authorization Act that was recently passed by Congress with bipartisan support is Section 5314 – a law that is designed to encourage whistleblowers within the financial industry to report money laundering to the Department of the Treasury. This law was modeled closely after the highly successful Dodd-Frank Act and includes a monetary incentive for employees who take the risk of acting as whistleblowers. Under Section 5314, any employee who provides “original information” regarding money laundering is eligible to receive a reward from the Department of the Treasury.

While this law is meant to encourage whistleblowers within financial institutions that are engaged in money laundering to come forward, there are some concerns about how effective it will be. These concerns are centered around two potential loopholes in the law that some fear may be abused by the Department of the Treasury. The first loophole is the fact that the new law gives the Department of the Treasury complete discretion when it comes to setting the amount of the monetary reward that whistleblowers will receive. This means that the law does not provide the federal government with any obligation to pay whistleblowers a substantial amount despite the protections that the law claims to promise. The second concerning loophole with the law is the fact that employees who work for institutions that are insured under the Federal Deposit Insurance Act are not eligible to take advantage of the law’s provisions, rendering Section 5314 useless for any employee who discovers money laundering within an FDIA insured institution.

While President Trump has threatened to veto the bill that Section 5314 is a part of, the bill was passed with a veto-proof majority in Congress, making it all the more likely that it will eventually be signed into law. To learn more about these new whistleblower provisions and what they will mean for employees and employers alike, be sure to check out our upcoming webcast on what businesses need to know about Section 5314 of the 2021 National Defense Authorization Act.

Note: The Knowledge Group continuously produces webcasts on this topic and other hot-buttons issues relating to financial industry law to keep you ahead of the curve.