On August 1, 2024, the Department of Justice launched its Corporate Whistleblower Awards Pilot Program (the “Pilot Program”). Under this 3-year initiative managed by DOJ’s Criminal Division, a whistleblower may be eligible for an award of up to $50 million if she provides DOJ with information about corporate misconduct in certain industries. As described in greater detail in the program guidance and below, the information must relate to at least one of four areas, including certain crimes relating to financial institutions, foreign corruption by companies, domestic corruption by companies and federal health care offenses involving private or other non-public health care benefit programs.
The Pilot Program has particular implications for financial institutions (“FIs”) and their anti-money laundering/countering the financing of terrorism (“AML/CFT”) compliance program personnel. Real-world application of the Pilot Program presumably will reveal the practical interplay (and possible tensions) between the Pilot Program and the relatively new whistleblower provisions under Bank Secrecy Act (“BSA”) created by the Anti-Money Laundering Act (“AML Act”), on which we have blogged frequently (see here, here, here, here, here and here).
Who is Eligible for an Award?
An individual, or group of individuals – not a corporation or other entity – is eligible to share in the net proceeds of a civil or criminal forfeiture if they provide DOJ with information in writing about corporate crime that results in a successful forfeiture exceeding $1,000,000.
The individual’s submission must be voluntary, meaning it must occur: (i) before DOJ requests or demands the information; (ii) where the individual has no preexisting obligation (such as a cooperation agreement) to provide the information; and (iii) where there is no government investigation or threat of imminent disclosure.
And to be eligible for an award, the whistleblower must not have “meaningfully participated” in the criminal conduct they are reporting, and they must be truthful and not withhold significant information.
Original Information
The individual must provide “original information” – information the individual knows from their own personal experiences or communications and not from publicly available sources. In addition, the information must not be known by DOJ, except where the information materially adds to the information DOJ already has.
The definition of “original information” is relevant to AML/CFT compliance personnel of FIs. The Pilot Program states that information is not “original” if the individual “learned the information in connection with the entity’s processes for identifying, reporting, and addressing possible violations of law[,]” as well as information provided by “an employee whose principal duties involve compliance or internal audit responsibilities . . . and the information relates to or is derived from these responsibilities or functions[.]” This language appears to apply to the vast majority of information that could be provided by AML/CFT compliance personnel, whose jobs focus on identifying illicit finance and potential violations of law (including misconduct by a FI insider) and addressing them, either by enhancing transaction monitoring of the account at issue, terminating the account, and/or filing Suspicious Activity Reports (“SARs”).
This language is very different than the whistleblower provisions of the AML Act, which explicitly invite without limitation internal compliance officers of FIs to use the information obtained through their compliance functions in order to pursue a whistleblower reward.
However, the Pilot Program provides that compliance personnel’s information still will be deemed to be “original” if the reporting individual has a “reasonable basis to believe” that (a) disclosing the information to DOJ “is necessary to prevent the relevant individual or entity from engaging in criminal conduct that is likely to harm national security, result in crimes of violence, result in imminent harm to patients in connection with health care, or cause imminent financial or physical harm to others;” or (b) the subject of the report is engaging in obstructive conduct.
Further, information learned as a result of a reporting individual’s internal compliance function still will be “original” if “at least 120 days have elapsed since they provided the information to the relevant entity’s audit committee, chief legal officer, chief compliance officer (or their equivalents), or their supervisor, or since they received the information, if they received it under circumstances indicating that the entity’s audit committee, chief legal officer, chief compliance officer (or their equivalents), or their supervisor was already aware of the information.”
Although the above complications of the Pilot Program may bedevil potential whistleblowers and their attorneys seeking monetary awards, these nuances will not make much practical difference to a FI that has received a whistleblower complaint. As discussed below, the Pilot Program imposes a very short timeline on companies to self-report to DOJ potential misconduct which has come to light. A whistleblower’s information will constitute a possible threat to a company regardless of whether the whistleblower recovers.
What are the Eligible Subject Areas?
An individual’s information must pertain to one of the following subject matter areas:
a. Violations by financial institutions, including money laundering, anti-money laundering compliance violations, registration of money transmitting businesses, and fraud against or non-compliance with financial institution regulators.
b. Violations by or through companies and related to foreign corruption and bribery, including violations of the Foreign Corrupt Practices Act, the Foreign Extortion Prevention Act, and money laundering statutes.
c. Violations committed by or through companies related to the payment of bribes or kickbacks to domestic public officials.
d. Federal health care violations not covered by the Federal False Claims Act, 31 U.S.C. § 3729, et seq., including (i) crimes involving private or other non-public health care benefit programs, where the overwhelming majority of claims are submitted to private or other non-public health care benefit programs, and (ii) fraud against non-governmental entities in the health care industry, where the overwhelming majority of the actual or intended loss was to patients, investors, and other non-governmental entities.
How Much Can a Whistleblower Be Awarded?
A whistleblower may be eligible for an award of up to 30% of the first $100 million of the forfeited proceeds and up to 5% of any net proceeds forfeited between $100 million and $500 million. Thus, a whistleblower could be awarded as much as $50 million. However, owners and lienholders of the property and individual victims of the scheme will be compensated first, with the whistleblower award taken from whatever forfeiture assets remain.
The amount of the award is solely within DOJ’s discretion. DOJ may increase the award based on: (i) the importance of the information provided; (ii) the amount of assistance provided by the whistleblower; and (iii) whether the whistleblower reported the suspected criminal conduct through an internal compliance system.
DOJ may decrease the award if the whistleblower: (i) profited from the underlying criminal conduct; (ii) unreasonably delayed reporting the conduct; (iii) interfered with a company’s internal compliance and reporting systems by making false statements or withholding information; or (iv) had a supervisory role over the offices or personnel engaged in the conduct.
The Pilot Program’s focus on forfeiture is a critical difference between the AML Act’s whistleblower provisions, which entitles whistleblowers to an award of between 10 and 30 percent of the value of “monetary sanctions” above $1 million collected as a result of an enforcement action. Importantly, “monetary sanctions” do not include forfeiture under the AML Act. That is an odd limitation: historically, the vast majority of significant AML-related criminal enforcement actions have rested on forfeiture. For example, Danske Bank was sentenced to pay over $2 billion in forfeiture for its alleged AML-related failures. Thus, in this regard, the Pilot Program is a much more attractive vehicle to would-be AML/CFT whistleblowers than the AML Act itself.
Interplay With Other Whistleblower Programs
The Pilot Program states that an individual is not eligible if “[t]hey would be eligible for an award through another U.S. government or statutory whistleblower, qui tam, or similar program if they had reported the same scheme that they reported under this pilot program.” This language is potentially confusing because it appears to exclude many potential whistleblowers who also could report the same scheme under the AML Act, and/or to the SEC or to the IRS, whose whistleblower programs often will apply to much of the same conduct also covered by the Pilot Program.
This confusion is mitigated at least in part by a footnote in the Pilot Program, which states that if an individual is unsure of whether they may qualify for another whistleblower program or the Pilot Program, “they should submit information to both programs so that the [DOJ] can assess the information and determine whether the individual may qualify for the Pilot Program.” Companies therefore can expect that a whistleblower will report alleged misconduct to multiple agencies.
Takeaways
The purpose of the Pilot Program is to incentivize individuals to report corporate crime to DOJ and (although it is not a condition precedent for receiving an award) internally. The incentive to report to DOJ is obvious; but reporting internally could lead to a higher award from DOJ, provided the individual also reports their information to DOJ within 120 days of reporting it internally (even if the corporation reports the conduct to DOJ first).
At the same time it launched the Pilot Program, DOJ’s Criminal Division also temporarily amended its Corporate Enforcement and Voluntary Self-Disclosure Policy to provide that if a whistleblower makes both an internal report and a report to DOJ, the company will still qualify for a presumption of declination as long as it self-reports the conduct to DOJ within 120 days of receiving the whistleblower’s internal report.
This gives companies an enormous incentive to enhance their existing corporate compliance programs, including, or most importantly, by encouraging internal reporting of complaints. The benefit to the company of encouraging internal reporting is great – it provides the corporation with an opportunity to identify and remediate the conduct and make a voluntary self-disclosure to DOJ in order to qualify for a declination.
But as we know, doing all that within 120 days will be difficult. Companies should prepare by beginning to enhance their corporate compliance programs now, including by training compliance specialists on how to quickly and properly respond to complaints, and, by consulting with external counsel as soon as they learn that a complaint has legitimacy. By doing so, the company has the best chance of maintaining declination eligibility.
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