We are a big proponent of bank compliance officers. Finally, after decades of financial funny business, big banks are starting to pay lip service to federal anti-money laundering and compliance regulations. Banks are now hiring compliance officers by the dozens. We hoped that these folks could begin to rein in the financial greed and corruption symbolized Wall Street for years.
Not quite. We are hearing from some compliance officers that they are either being ignored or told to not rock the boat.
A good case in point are fraud losses. Banks have internal rules that require the audit committee and board of directors be notified when fraud losses exceed a certain dollar limit per day. If the loss exceeds $250,000, Office of the Comptroller of the Currency rules require the loss be reported to the government.
Fraud is a fact of life. Identity theft, hacking and check kiting schemes occur daily. When a bank loses more than $250,000 in a single day, regulators want to know immediately. These losses may be a represent a single unfortunate incident or signal that some larger and more sinister fraud scheme is taking place.
The rules aren’t very complicated. If you suffer a large fraud loss it must be reported. It seems the banks don’t want the public or regulators to know that they are losing money, however.
One scheme that was revealed to us today involves banks spreading out the loss over several days. For example, if a bank fraudulently spreads a $1 million hacking loss over a week, Uncle Sam never finds out.
FIRREA and Whistleblower Awards
In the aftermath of the savings and loan scandal, Congress passed the Financial Institution Reform, Recovery and Enforcement Act of 1989 – FIRREA for short. FIRREA contains many provisions to help regulators police fraud within banks. One of those provisions is a whistleblower award provision.
An insider with knowledge about fraud directed at bank or in which a bank participates is eligible for an award of up to $1.6 million. Although the awards are much smaller than those found in the False Claims Act, qualifying for one is much easier.
Many people are confused by the whistleblower awards and how to qualify. The existence of two separate award schemes further complicates matters.
Under the False Claims Act, whistleblowers must demonstrate a loss to government funds or programs. This can happen if a bank is found to have misused TARP bailout monies. With FIRREA, however, one must only prove that the banks’s financial health was jeopardized by the improper conduct. Simply jeopardizing the bank’s financial health is enough to trigger the law.
We are interested in speaking to compliance officers and others within banks who have knowledge of improper loss reporting practices. We also want to know about any other financial shenanigans that could later hurt the bank or taxpayers.
Whistleblowers – America’s New Heroes
Whistleblowers are the new American heroes. Regulators can’t be monitor every transaction at every bank, every day. Government auditors examine just a small fraction of one percent of bank transactions each year. Congress recognized this and passed robust whistleblower award laws in order to incentivize people to come forward and report wrongdoing.
An added benefit of FIRREA is confidentiality. Under FIRREA, there is no public filing required of the whistleblower meaning it is much easier to protect a whistleblower’s identity. (There are no guarantees, however.)
The United States is one of the few countries that empowers bank workers to report fraud, help the government clean up corruption and earn an award. Hundreds of people step forward each year to stop greed and corruption. That is why we believe they are heroes.
Need more information? MahanyLaw is one of just a handful of law firms in the entire United States that helps bank whistleblowers collect awards under the FIRREA law. Our whistleblower clients have already received in excess of $100 million in awards and have helped the government recoup billions of dollars.
MahanyLaw – America’s Whistleblower and FIRREA Lawyers