New Whistle-Blowing Law Applies to Internal Complaints

​The Anti-Money Laundering Act's (AMLA's) whistleblower protections took effect this year and apply to internal complaints, including complaints brought by those who work in compliance, such as auditors and attorneys. The law's broad definitions and expansive remedies create challenges for employers in affected industries—challenges that should be addressed in strong whistle-blowing policies and well-documented discipline of whistleblowers who also are poor performers.

The AMLA applies to financial institutions, and that industry is defined expansively to include employers ranging from banks and insurance companies to pawnbrokers, travel agencies and jewelers, said Linda Jackson, an attorney with Arent Fox in Washington, D.C.

Any business where there is lots of cash, such as casinos, car washes and restaurants, may be affected, said Philip Berkowitz, an attorney with Littler in New York City.

Differences from Dodd-Frank Act

While the AMLA's whistleblower protections are modeled after the Dodd-Frank Act's whistleblower protections, there are some key distinctions, said Joseph Cartafalsa, an attorney with Ogletree Deakins in New York City. The Dodd-Frank Act is a financial reform law that encourages people to report securities violations by offering financial rewards.

The AMLA protects internal whistleblowers—those who complain internally to their employer—as well as those who complain to attorneys general, the secretary of the treasury or regulators. "This is in contrast to Dodd-Frank's whistleblower protections, which only protect whistleblowers who complain to the Securities and Exchange Commission or the Commodity Futures Trading Commission," he said.

The AMLA also defines a whistleblower as anyone who reports a violation, including those who report violations as part of their job duties.

"Again, this definition is broader than under Dodd-Frank, which essentially excluded insiders who work in compliance roles from the definition of whistleblower," Cartafalsa said. "As such, under the AMLA, employees who may learn of potential violations during the ordinary course of their duties, including those who work in compliance or who function as auditors or counsel, fall within the AMLA's broader whistleblower protections."

"As applied to lawyers, this change poses hard questions of legal ethics," stated Greg Keating, an attorney with Epstein Becker Green in Boston, and Daniel Green, an attorney with the firm's New York City office, in an e-mail. "As applied to compliance professionals, it poses moral hazards regarding whether one is investigating compliance concerns as an agent of the employer or in order to collect evidence for a whistleblower bounty."

Remedies

The AMLA expands potential monetary rewards for whistleblowers, likely encouraging whistle-blowing activities, Cartafalsa said.

Employees who prevail on their claims are entitled to reinstatement, double back pay with interest, compensatory damages including attorney fees and costs, and any other appropriate remedy. The AMLA's rights and remedies can't be waived by any agreement, such as a contract, handbook or release, Jackson noted. Claims against an employer arising under a violation of the whistleblower provisions are not subject to arbitration.

In a successful enforcement action in which the monetary sanctions against the company exceed $1 million, the whistleblower must receive an award, which can be as high as 30 percent of the sanctions, Jackson said.

Factors considered in determining the amount of the award include:

• The significance of the information provided.
• The degree of assistance provided.
• The interest of the Department of the Treasury in deterring violations.

Whistle-Blowing Policy

A strong whistleblower policy will clarify that the employer will not retaliate against whistleblowers for good-faith reports of money-laundering investigations, Jackson said.

The policy should include a hotline, in addition to the titles of people within the organization to whom the whistleblower can report concerns, she said.

"This policy should be readily available to employees, in conjunction with the employer's other policies, either on the intranet or by distribution at onboarding, or on request to human resources or any supervisor or person in a managerial position," she noted. "Periodic training should also be offered on this, as well as other core policies, with an emphasis on a culture of compliance."

The policy should emphasize the intent to promptly investigate and, to the degree necessary, correct any reported concerns. Employers also should assess whether to self-report discovered issues, Jackson said.

Disciplining Whistleblowers

"The anti-retaliation provisions of the AMLA, like many whistleblower and anti-retaliation laws, significantly complicate discipline of a whistleblower," Cartafalsa said. "We often see whistleblowers who are disgruntled employees who attempt to use the laws as a sword rather than a shield and who file complaints in an attempt to avoid disciplinary action and to seek revenge on the company or a supervisor."

He added that under the AMLA, whistleblowers need not be correct in their complaints but merely reasonably believe that the complained of conduct constitutes a violation of applicable law. "Given the complexities of applicable banking and anti-money-laundering laws, it is often relatively easy for an employee to establish—or, in a worst case, manufacture—a reasonable belief of an alleged violation."

Cartafalsa noted that employers should be prepared to prove through documented evidence a history of pre-whistleblower activities or behaviors that continued after the whistleblower report and that would have resulted in the discipline regardless of the whistleblowing.

He recommended the following steps:

• Provide prompt, documented feedback on performance improvement areas, including written performance improvement plans or less formal written documentation such as contemporaneous e-mails regarding performance lapses.
• Train supervisors on the importance of timely and appropriately documenting performance issues so there is clear proof of pre-whistleblower issues.
• Train supervisors on what constitutes prohibited retaliation.
• Ensure appropriate use of annual or other reviews by managers. Too often, managers rate even poor performers or problematic employees as "meets expectations" on an annual review, either to avoid conflicts with the employee or in a misguided attempt to keep up morale.
• Involve the HR and legal departments in any decisions to discipline or fire a whistleblower.

Employers should expect that the AMLA "is a harbinger of more whistleblower laws at both the state and federal levels," Keating and Green predicted.