Recent headlines highlighted another massive fine levied against Barclays Bank for failing to adopt suitable anti money laundering (“AML”) and anti corruption protocols. An examination of this case highlights emerging whistleblower award opportunities available under the Financial Institutions Reform Recovery and Enforcement Act. Known by its acronym “FIRREA”, the law permits whistleblower awards of up to $1.6 million for information relating to information about banking misconduct.
In the most recent big settlement, U.K. regulators fined Barclays Bank $109 million (USD). Britain’s Financial Conduct Authority says the London based bank allowed wealthy customers to structure transactions in such a way that they were not entered into the bank’s compliance monitoring system.
Although there is no evidence that the transactions were used to finance terrorism, poor compliance makes it impossible to know where money is going and increases the likelihood of accounts being used for illegal activities.
Apparently the bank made $52 million on one questionable deal and agreed in another to keep a client’s name off bank record systems. Instead of tracking transactions electronically on the bank’s normal compliance system, at least one client had their records sealed in a special safe not made known to regulators or even most bank staff.
The recent Barclay’s fine isn’t an isolated incident. Several years ago, U.S. regulators fined Barclays almost $300 million for engaging in prohibited (blacklisted) transactions with Iran, Sudan and Libya.
Terrorism, drug cartels and organized crime rely on banks. U.S. and international laws require banks to maintain stringent anti-money laundering compliance systems. These AML rules require banks to know their customers, perform enhanced due diligence on certain classes of customers, and not allow customers to dictate that transactions remain off the books.
FIRREA and AML
So how do AML violations by foreign banks lead to whistleblower awards? FIRREA.
FIRREA was born out of the Savings and Loan crisis in the 1980’s. The law was originally used to prosecute individuals that harmed banks. During the late 80’s and early 90’s, dozens of bank officers were prosecuted for intentionally making bad loans thereby causing many banks to fail.
Recent court cases have broadened the scope of FIRREA. Now the statute can be used to punish banks for their own misconduct. If a federally insured bank breaks the law, chances are there is a FIRREA violations. Awards are calculated on a percentage basis and can quickly reach the $1.6 million cap. Even foreign banks can be tagged under FIRREA depending on their correspondent relationships with U.S. subsidiaries.
A second of the benefit of the FIRREA statute is confidentiality. There is no unsealing or other process that automatically reveals the whistleblower’s identity.
MahanyLaw – America’s Whistleblower Lawyers