At the end of March, FinCEN published a notice of proposed rulemaking (“NPRM”) for its whistleblower program, which has been up and running since 2021. The proposed rules are a welcome development. They are a sign that the Treasury Department appreciates the value of the whistleblowers who have come forward under the program so far and see the potential for future whistleblowers with information about Bank Secrecy Act violations (such as insufficient anti-money laundering programs) and sanctions evasion.
The NPRM’s basic framework is strong. Much of it is modeled after the SEC’s successful whistleblower program—not surprising, since the FinCEN whistleblower statute itself is modeled after the same. The rules propose the creation of a Tip, Complaint, or Referral (TCR) form for FinCEN that can be submitted electronically, similar to the SEC’s own form TCR. A preview of the form is available in Appendix A of the NPRM. The statute requires FinCEN to issue awards of 10 to 30 percent of collected monetary sanctions in covered and related actions, so long as the enforcement action exceeds the $1 million statutory threshold. The NPRM provides importance guidance on how the agency proposes evaluating the level of contribution from a whistleblower, which will guide the agency in determining the appropriate award. In a deviation from the SEC’s standard that a whistleblower must “substantially contribute” to an enforcement action, it seems that FinCEN intends to focus on whistleblowers who “lead to” an investigation. Although the agency leaves itself wiggle room to consider whistleblowers who do not start an investigation for an award, this difference in programmatic approach is noticeable and potentially troubling.
Again following the SEC’s lead, FinCEN proposes to publish Notices of Covered Actions. The proposed rule includes a form (the aptly named “Form WB-App”, in Appendix B) for whistleblowers to submit to apply for an award. Awards would be paid from the Financial Integrity Fund, the revolving fund Congress created so the program would not depend on fresh appropriations every time an award is due.
There are several especially pro-whistleblower features in the proposal. FinCEN would allow anonymous tip submission even without a lawyer (unlike the SEC program). The NPRM would also recognize related actions and allow aggregation of multiple Treasury and DOJ actions arising from substantially the same facts as long as they settle within a “reasonable time.” FinCEN promises to provide future guidance on what a reasonable time means, which will be critically important.
And in perhaps the most important deviation from the SEC’s program, FinCEN provides that whistleblowers would be presumptively eligible for 30% of the monetary sanctions collected when the total is $15 million or less. (The SEC’s presumptive level is $5 million.)
FinCEN is not free, of course, to propose whatever regulations it wants. The regulations have to work within the statutory framework of the 2020 Anti-Money Laundering Improvement Act, the authorizing statute for the whistleblower program. This means that the proposed rules are limited in many ways, including, for example, that forfeiture, restitution, blocked property, and victim-compensation payments are not considered part of the “monetary sanctions” that form the basis for an award. Fortunately for whistleblowers, however, the DOJ’s Corporate Crime Whistleblower Award Pilot Program allows for a separate avenue for those whistleblowers with information that may lead to forfeiture – a common remedy for some sanctions evasion enforcement actions and similar cases.
Another limitation in the regulations that is not statutorily required is the implementation of a 120-day waiting period for certain officers, directors, internal-reporting personnel, and audit or compliance professionals before they can report to FinCEN and be award-eligible. FinCEN says the idea is to give internal compliance systems time to work, which is similar to the rationale underlying the SEC’s parallel rule. That is understandable. But rigid waiting periods can also delay the very tips the government most needs quickly, especially in sanctions, correspondent banking, or fast-moving national-security matters.
We are thrilled to see that FinCEN’s whistleblower program continues to charge ahead. In the scary and uncertain world of reporting wrongdoing, any clarity potential whistleblowers can get about how to submit a tip, how it will be handled, and whether they might qualify for an award is a great thing. And when whistleblowers feel secure coming forward, we all win.
