The AMLA Creates a Significant New Source of Risk for Financial Institutions

Second Blog Post in an Extended Series on Legislative Changes to the BSA/AML Regulatory Regime

As we have blogged, the Anti-Money Laundering Act of 2020 (the “Act”) (part of the National Defense Authorization Act (“NDAA”), passed on January 2, 2021), represents a historic overhaul of the Bank Secrecy Act (“BSA”).  One of the most important changes – and certainly one that has attracted great attention by the media and commentators – is Section 6314 of the NDAA, entitled “Updating whistleblower incentives and protections.” The Act’s expanded whistleblower provision is modeled after the Dodd-Frank Act’s whistleblower provisions, and seeks to follow in Dodd-Frank’s footsteps.  But, there are some key differences between the Act and Dodd-Frank.  The Act also creates a more limited whistleblower program specifically pertaining to foreign corruption.

Aside from expanding the potential monetary rewards, the most significant aspect of the Act is that it explicitly invites internal compliance officers of financial institutions to use the information obtained through their compliance functions in order to pursue a whistleblower reward. This provision highlights the tension between individuals and institutions, and increases the pressure on financial institutions to comply with the law, take whistleblowers seriously, and be ready to deal with employees who purport to be whistleblowers but may be pursuing their own agenda. It also is a prudent time for financial institutions to review their internal complaint procedures and assess whether any changes are warranted given this new development.
Continue Reading AMLA Adds Robust New Whistleblower Provisions for Anti-Money Laundering Violations

On December 3, the U.S. House and Senate Armed Services Committees reached an agreement on the National Defense Authorization Act (“NDAA”), an annual defense spending bill.  Within this huge bill (well over 4,500 pages) are widespread changes to the Bank Secrecy Act (“BSA”), coupled with other related changes dealing with money laundering, anti-money laundering (“AML”),

The Southern District of New York (“SDNY”) recently rejected a retaliation claim brought by a former bank employee under the Bank Secrecy Act (“BSA”), granting summary judgment in favor of the employer bank because the former employee failed to demonstrate that his firing was caused by his act of reporting a potential violation of law to the government. Although the reasoning underlying the Court’s Order is straight-forward, the case provides another reminder of the often difficult employment issues that both financial institutions and potential whistleblowers can face.

Whistleblowing as to alleged anti-money laundering (AML) violations is a growing phenomenon, perhaps best exemplified by the fact that a whistleblower precipitated the colossal Dankse Bank money laundering scandal. Previously, we blogged about a bank whistleblower case producing the opposite result as the SDNY Order here. In this post, we discuss both the BSA whistleblower statute and the SDNY Order, and, more generally, we note steps that financial institutions might take to protect themselves from liability and legitimate whistleblowers from retaliation.
Continue Reading Would-Be Whistleblower Fails to Show Causation Under the Bank Secrecy Act for Termination

The Office of the Comptroller of Currency (“OCC”) issued an extraordinary announcement regarding the decision of a former bank general counsel – Daniel Weiss, formerly employed by Rabobank, N.A. – to enter into a Consent Order in which Mr. Weiss agreed to be barred from the banking industry and pay a $50,000 fine. The Consent

Proposed Legislation Creates Rewards Program for Whistleblowers of Foreign Government Corruption

Third Post in a Three-Post Series

Newly proposed legislation, if passed, will authorize a whistleblower program for individuals providing law enforcement with information leading to the seizure, forfeiture, and/or repatriation of foreign stolen assets that come within the possession or control of any United States person.

In early March, the House Financial Services Committee released three proposed bills to codify many of the suggested reforms discussed during ongoing conversation among financial agencies, law enforcement, financial institutions, and commentators regarding the Bank Secretary Act (“BSA”) and Anti-Money-Laundering (“AML”) and Combating the Financing of Terrorism (“CFT”) laws. The first two proposed bills are discussed here and here.

In this post, we summarize the last of the three proposed bills, The Kleptocracy Asset Recovery Rewards Act (the “Bill”). The Bill allows the Department of Treasury to provide whistleblowers not only with monetary incentives but also protective measures, including asylum for the whistleblower and his or her immediate family. As we will discuss, the Bill proposes a unique whistleblower program focused on foreign corruption, and which differs in important ways from other, established government whistleblower programs.
Continue Reading Proposed Kleptocracy Asset Recovery Rewards Act Adds Whistleblower Incentives and Protections

The Danske Bank money laundering scandal continues to reveal its many permutations and confirm its status as the largest money laundering case in history. We summarize here certain events since November 2018, since we last have blogged about the case (see here, here, and here). Proving that no one is immune from the potential taint, notable events include an investigation announced by the Estonian financial regulator; an investigation into that same Estonian regulator itself; the commencement of the inevitable investor lawsuit; and scrutiny of what some have described as the “cleanest” bank in the world, Swedbank, one of the most important banks in Northern Europe.
Continue Reading Massive Danske Bank Money Laundering Scandal Continues to Unfold

Former Bank Employee Testimony Highlights Limited Whistleblower Protections in Europe

In September, the Danish law firm Bruun & Hjejle’s report (“B&H Report”) released its internal investigation report into alleged money laundering conducted through the Estonian branch of Danske Bank (“Danske”). The enormity of the scandal outlined in the report cannot be understated: from 2007 through 2015, at least 200 billion Euros were laundered through Danske. The release of the B&H Report has triggered the predictable cascade of resignations, investigations, hearings, recriminations and stock plunges that have begun playing out over the past eight weeks. These events, in turn, are beginning to illuminate the two principal sides of the scandal: the institutional failures at a large, sophisticated, international bank that allegedly allowed wrongdoing on this scale to go unchecked for eight years; and the efforts countries like Russia will make – and individuals and entities they will exploit – to illegally channel substantial wealth to the West.

As we previously blogged, the B&H Report found that Danske processed 200 billion Euros in suspicious transactions made by thousands of non-resident customers, principally from Russia and former Soviet states. According to the B&H Report, the success of the laundering was due to the near-total failure of the Estonian Danske branch to implement adequate anti-money laundering (“AML”) procedures and the parent Danske Bank Group’s failure to recognize and act upon numerous red flags that should have alerted it to the Estonian branch’s issues. However, while finding that the Estonian branch violated numerous legal obligations in failing to have and implement adequate AML processes and procedures, the B&H Report stopped short of accusing Danske’s Board of Directors, Chairman, Audit Committee, Chief Executive Officer or any executive of violating their legal obligations in regard to these failures.

Recent testimony by former Danske employee turned whistleblower painted a less forgiving picture.
Continue Reading Danske Bank Money Laundering Scandal: The Tip of the Iceberg(s)

A recent court opinion emphasizes the sensitive issues involved in terminating potentially difficult employees — or, from the employee’s or perhaps the government’s perspective, in terminating whistleblowers who were retaliated against for being willing to point out compliance failures. Although this competing dynamic applies across all industries, a recent opinion from the U.S. Federal District Court for the Eastern District of Louisiana, Kell v. Iberville Bank, addressed such a situation in the Anti-Money Laundering (“AML”)/Bank Secrecy Act (“BSA”) context, in which a bank’s former compliance officer sued her former employer for allegedly terminating her in retaliation for raising uncomfortable issues about claimed insider abuse and the alleged failure to file a Suspicious Activity Report (“SAR”).
Continue Reading Case Highlights Potential Protections for BSA Whistleblowers

In February 2017, we blogged about a whistleblower complaint filed against Bank of the Internet (“BofI”) by its former internal auditor. The blog post addressed what the whistleblower believed was BofI’s wrongdoing in relation to responding to a subpoena from the Securities and Exchange Commission (“SEC”), and when dealing with a certain loan customer in potential violation of the Anti-Money Laundering (“AML”) rules of the Bank Secrecy Act (“BSA”).

Less than two months after our blog post, three BofI stockholders brought a putative class action complaint against BofI seeking to represent a class of individuals who purchased BofI stock, in a case captioned Mandalevey v. BofI Holding, Inc. These plaintiffs alleged BofI violated the Securities Exchange Act through, among other alleged misrepresentations, falsely denying the company was under investigation for money laundering violations.  A federal court recently dismissed all claims against BofI.

This post focuses on that decision, the allegations relating to the federal investigation of BofI, and the Court’s interesting reasoning in dismissing these plaintiffs’ claims. Although the bank won this latest round, the saga involving BofI underscores how financial institutions face an increasing risk that alleged AML and Counter-Terrorism Financing (“CTF”) violations will lead to follow-on allegations of securities law violations – allegations brought not only by the government (see here), but also by investor class action suits (see here, here and here).
Continue Reading When A Purported Money Laundering Investigation Turns Into a Class Action Complaint: The Latest Round in BofI’s Fight to Put Money Laundering Allegations in the Rearview Mirror