Today the White House released a anti-corruption directive federal agencies to prioritize anti-corruption efforts, including money laundering. The directive recognizes that “[c]orruption threatens US national security, economic fairness, global anti-poverty and development efforts, and democracy itself ”and requires federal agencies to develop recommendations to effectively prevent and combat against corruption. To win this important battle against corruption, the Biden administration should use whistleblower reward programs in federal agencies to encourage whistleblowers to report bribes, money laundering and other fraud schemes that would otherwise go unnoticed. And the administration and Congress should provide civil and criminal law enforcement agencies with the resources to investigate whistleblowers and prosecute violations of anti-corruption and anti-money laundering laws that whistleblowers claim. courageously commit to report.

Costs of corruption and money laundering

the anti-corruption directive identifies the substantial burden that corruption places on the US economy and national security:

In financial terms alone, the costs of corruption are enormous. It has been estimated that acts of corruption undermine between 2 and 5 percent of the world’s gross domestic product. While these costs are not distributed evenly around the world, the abuse of power for private gain, embezzlement of public property, bribes and other forms of corruption impact every country and every country. community. The products of these acts cross national borders and can impact economies and political systems far from their origin. Anonymous shell companies, opaque financial systems, and professional service providers allow the movement and laundering of illicit wealth, including in the United States and other rule-of-law democracies.

Indeed, several studies cited in a DOJ and SEC FCPA guide found that corruption increases the cost of doing business globally, inflates the cost of government contracts in developing countries, introduces significant uncertainty into business transactions, and puts honest companies at a disadvantage that do not pay bribes. wine. Whistleblower Reward Programs fight corruption by attracting high-quality advice that enables government to uncover corruption, money laundering and other frauds.

Whistleblowers can play a vital role in the fight against money laundering

One of the specific objectives of the Biden administration’s anti-corruption initiative is to “[c]combat all forms of illicit financing in the United States and in the international financial systems, including by strictly enforcing federal law requiring American companies to report their beneficial owner (s) to the Department of the Treasury; [and] reduce offshore financial secrecy. Since criminal enterprises that promote corruption often launder ill-gotten gains, enticing whistleblowers to report money laundering schemes is essential in the fight against corruption.

Fortunately, earlier this year Congress enacted the Anti-Money Laundering Act of 2020 (AMLA), a complete overhaul of U.S. anti-money laundering laws that includes a provision establishing a whistleblower reward program at the Department. of the Treasury.

Under Article 6314 of the AMLA, a whistleblower who voluntarily provides information on a violation of the Banking Secrecy Act (BSA) can obtain up to 30% of the financial penalties collected that the Treasury recovers in the context of a legal or administrative action brought under the BSA which results in collected monetary penalties exceeding $ 1,000,000. The AMLA whistleblower inducement provision encourages whistleblowers to provide ‘original information’, that is to say, information that is derived from the independent knowledge or analysis of a whistleblower or that is not known to the Treasury or Justice departments from another source, unless the whistleblower does not or the original source of the information. A whistleblower can report an AML violation anonymously and qualify for a reward when represented by legal counsel.

The new AML Whistleblower Reward Program may be an effective tool in the fight against money laundering, but as noted in a recent Wall Street Journal article, the AML whistleblower program has trouble getting started because it lacks some of the key features of the SEC’s whistleblower program. For example, the provision on MLA whistleblower rewards does not include a minimum award percentage and a funding mechanism to pay whistleblower rewards from sanctions collected as part of enforcement actions. of the AML law. And the whistleblower protection provision in the LBA includes a massive loophole that excludes from the scope of protection employees of FDIC depository institutions, that is to say, employees of most American banks. To implement the Biden administration’s anti-corruption initiative, Congress should amend the AMLA to create a more effective whistleblower program.

SEC Whistleblower Program Proven Effective in Tackling FCPA Violations

The Biden administration’s anti-corruption initiative aims to strengthen the capacity of national and international institutions and multilateral bodies to promote financial transparency, strengthen the frameworks of financial institutions to prevent corruption in development finance projects and to fight against money laundering, illicit financing and corruption. The SEC whistleblower program has already proven to be a critical tool in the fight against corruption as advice from SEC whistleblowers has led to some of the FCPA’s biggest enforcement actions in the past. last decade.

As part of the SEC’s whistleblower program, the SEC will award rewards to whistleblowers who provide original information that leads to enforcement action with total monetary penalties (penalties, restitution and interest) in excess of $ 1 million. In return for the valuable information, a whistleblower may receive a reward ranging from 10% to 30% of the total monetary penalties levied as part of an FCPA enforcement action. The whistleblower can get a reward not only from the monetary penalties levied by the SEC, but also from the penalties levied by the Department of Justice in related action. The SEC allows whistleblowers to submit information anonymously to the SEC if they are represented by legal counsel.

Enforcement actions taken in part on the basis of whistleblowers resulted in orders of over $ 3.5 billion in penalties, and the SEC paid out about $ 928 million to whistleblowers and attracted more than 40,000 whistleblowers, including whistleblowers in 70 countries outside of the United States. , as well as all states of the United States.

The FCPA prohibits the payment of bribes to foreign officials to help them obtain or keep a contract. The prohibition applies:

  • US and foreign public companies that are publicly traded in the United States or that are required to file periodic reports with the SEC; and
  • certain foreign persons and companies operating in the United States.

Courts have interpreted the term “foreign agents” broadly. For example, employees of state-owned or controlled entities are considered foreign officials under the FCPA.

The FCPA also requires issuers to maintain adequate internal controls that provide reasonable assurance that transactions are executed and that assets are viewed and recognized in accordance with management authorization. Common violations of the FCPA’s internal control provision include:

  • forge documents to conceal bribe payments;
  • fraudulently present bribes as normal business expenses;
  • overbilling knowing that part of the payment is a bribe; and
  • Inappropriate hiring practices, such as hiring candidates solely on the basis of referrals by client executives and government officials.

The SEC whistleblower program will continue to attract high-quality advice that will allow the SEC and the DOJ to investigate and prosecute FCPA violations.

Whistleblowers can boost the fight against corruption

As the Biden administration develops a strategy to dramatically strengthen the U.S. government’s ability to fight corruption, it should assess how whistleblower reward programs can dramatically improve the government’s ability to identify corruption, money laundering and other forms of fraud that undermine democracy. and civil society both nationally and internationally.

Resources on the SEC whistleblower program



Source link