Congress Must Pass Anti-Money Laundering Protections, Whistleblower Sanctions


Congress is poised to pass urgently needed whistleblower protections targeting Russian money laundering and sanctions evasion. Bipartisan members of Congress agree that loopholes in whistleblower laws covering money laundering and penalties must be addressed if criminals, such as the Russian oligarchs who keep President Vladimir Putin in power, can be held responsible.

The scale of the problem targeted by whistleblower legislation is enormous. For example, the biggest money laundering scheme in history involved Russian oligarchs, including members of President Putin’s family and the Russian secret police (the FSB). A detailed investigation by Danske Bank confirmed that Russian millionaires and billionaires were illegally using this bank’s offices in Estonia to transfer more than $230 billion from Russia and former Soviet states to banks in New York. A whistleblower who first reported the scandal was forced to resign from his job, sign a very restrictive non-disclosure agreement and eventually had his identity illegally leaked to pro-Russian newspapers. Danish law provided no protection, the illegal leak was never investigated by authorities, and ultimately the whistleblower gave up his career as a banker. None of the New York banks that have taken in the billions deposited by their new Russian customers have been held responsible, and their customers continue to enjoy Manhattan’s elite real estate.

Money Laundering and Sanctions Legislation Pending in the House and Senate, House HR7195, sponsored by Representatives Alma Adams (DN.C.) and Anthony Gonzalez (R-Ohio) and S.3316, sponsored by the senses. Charles Grassley (R-Iowa), Raphael Warnock (D-Ga.), and Elizabeth Warren (D-Mass.), will solve those problems. This will give the Treasury Department the ability to successfully trace the hundreds of billions of dollars that have flowed through US banks and seize the assets of Russian oligarchs and others who launder money to hide their ill-gotten wealth.

Why is the whistleblower law so necessary? First, there is no protection for whistleblowers who report sanctions violations. Those who wish to report illegal business or financial transactions with North Korea, Iran, Venezuela or Russia have no legal protection. Second, whether you are reporting money laundering or a sanctions violation, the Treasury Department has no ability to compensate you for your sacrifices or information, and there is no requirement that a reward or compensation is ever paid to a whistleblower.

The reform legislation provides a quick and well-established solution to these problems. The bills simply mirror the highly successful Dodd-Frank whistleblower laws covering securities fraud, commodity fraud and violations of the Foreign Corrupt Practices Act. If adopted, the legal protections for reporting money laundering and sanctions violations will mirror those of Dodd-Frank.

Why use the Dodd-Frank model? Dodd-Frank and other similarly structured whistleblower laws are widely welcomed by law enforcement officials who administer anti-fraud programs. They are widely recognized as the most effective and powerful anti-corruption laws in the United States. Last July, the SEC’s director of enforcement applauded Dodd-Frank whistleblower procedures for their “essential role” in helping to “effectively detect wrongdoing” and “bring violators to justice.” . She described the “contributions” of whistleblowers under Dodd-Frank as “invaluable” in protecting investors and reporting foreign bribery. The most recent independent audit of US foreign bribery laws, conducted by the Organization for Economic Co-operation and Development, also praised Dodd’s ‘multifaceted’ whistleblower ‘protections’ -Frank, as they “provide powerful incentives for qualified whistleblowers to report foreign bribery.

The bills pending in Congress are 100% based on the effective provisions contained in Dodd-Frank. These provisions would incentivize and compensate whistleblowers whose “original information” leads to successful prosecutions. The genius of these laws is that they cost the taxpayer nothing and generate billions for victims of crime and taxpayers. This is accomplished by creating a “revolving fund” where sanctions obtained from criminals in cases triggered by whistleblowers are deposited. All compensation from these working funds, whether paid to victims, whistleblowers or taxpayers, comes directly from the fines and penalties generated by whistleblowers. The taxpayer pays nothing, but still gets the overwhelming majority of revenue generated by the whistleblower’s information. There is never a need for Congress to appropriate any money. The programs are self-contained and highly cost effective.

Dodd-Frank procedures are a win-win for accountability. The rule of law is justified by whistleblowers when fraudsters are held accountable. Taxpayers and victims of crime get between 70 and 90 percent of all funds raised through whistleblower cases. For example, under Dodd-Frank alone, the SEC has compensated securities fraud victims over $1.5 billion through whistleblower penalties. Finally, whistleblowers can use the compensation resulting from the sanctions paid by fraudsters to continue their lives and escape the difficulties caused by retaliation. These procedures were carefully reviewed by the House Oversight Committee and approved on a bipartisan basis, including formal endorsements by Reps. Gerry Connolly (D-Va.) and Gary Palmar (R-Ala.).

Where is the reform legislation? The House Financial Services Committee unanimously approved the bill and it is “marked” for a vote in the plenum.

The last known hurdle remaining in the House comes from the Appropriations Committee, chaired by Rep. Rosa DeLauro (D-Conn.). Once she approves the bill, it should move quickly as the legislation is approved for a vote in the House and the responsible Senate leadership is committed to passing the Grassley-Warnock-Warren bill once that it will be sent by the Chamber. Given the urgency of applying sanctions against Russia and seizing the assets of Putin’s oligarch’s enablers, HR 7195 and S. 3316 should be passed and placed on President Biden’s desk as soon as possible. Ukrainians are doing their job under the most trying circumstances. Congress must do its job and provide essential support for the sanctions it has already approved.

Stephen M. Kohn is a founding partner of the whistleblower law firm of Kohn, Kohn and Colapinto and Chairman of the Board of Directors National whistleblower center

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