AML whistleblower reform would lead to increased revenue, Congressional Budget Office says

On November 7, the Congressional Budget Office (CBO) published a cost estimate report for HR 7195a bipartisan bill reform the Anti-Money Laundering (AML) whistleblower program. According to CBO estimates, the bill could generate hundreds of millions of dollars in revenue over the next decade.

HR addresses 7195 Current loopholes in the law that established the AML whistleblower program, a whistleblower reward program designed to encourage people with direct knowledge of money laundering to come forward and cooperate with US authorities. However, the shortcomings of the law, in particular the absence of a mandatory minimum premium and the use of congressional appropriations to pay the prizesundermined the program.

HR 7195, which is co-sponsored by Representatives Alma Adams (D-NC) and Anthony Gonzalez (R-OH), addresses these shortcomings by incorporating language found in other successful whistleblower attribution laws such as the Dodd–Frank Act. The bill grants qualified whistleblowers rewards of 10 to 30 percent of funds raised in law enforcement action aided by their disclosure and establishes a fund to finance the payment of whistleblower rewards.

On June 22, the US House Committee on Financial Services voted unanimously by vote to approve HR 7195. A supplemental version of the bill in the U.S. Senate is co-sponsored by Senators Chuck Grassley (R-IA), Raphael Warnock (D-GA) and Elizabeth Warren (D-MA).

In its summary of HR 7195, the CBO explains that because the bill establishes a whistleblower rewards fund that is funded entirely by penalties collected, any rewards paid out under the program will not be subject to credits.

“Under current law, a whistleblower is eligible for up to 30% of the fine collected for
such violations, subject to the availability of appropriate funds,” CBO wrote. “However, Congress has not appropriated funds for this purpose, so neither agency has awarded whistleblower awards. Since HR 7195 would create a new fund for payments, the CBO expects that enactment of the bill will result in new payments to whistleblowers that would not be subject to the appropriation of funds.

The report then covers the estimated direct federal expenditures and revenues caused by HR 7195. According to the CBO, “[t]The estimate is based on criminal and civil prosecution data from the Department of Justice (DOJ) and the Financial Crimes Enforcement Network (FinCEN). The estimate also uses analysis from similar programs at the Securities and Exchange Commission (SEC) and the Commodities Futures Trading Commission (CFTC).

Assuming HR 7195 is enacted near the end of calendar year 2022, the CBO estimates it would “increase direct spending by $33 million over the 2023-2032 period.”

This estimated increase in direct spending is dwarfed by the CBO’s estimate of the increase in revenue caused by the reform of the AML whistleblower program. “Based on information from FinCEN, the CBO estimates that the agency would collect an additional $41 million annually over the period 2023-2032,” the report said. This annual amount is equivalent to a total of $410 million over the period.

HR 7195 would align the AML whistleblower program with both SECOND and CFTC Whistleblower Programs. In August, the main whistleblower lawyer Stephen M. Kohn of Kohn, Kohn and Colapinto published a cost-benefit analysis of the CFTC whistleblower program. He found that since its inception in 2010, the program had generated a profit of $2.6 billion.

HR 7195 is widely supported by whistleblower advocates. The National whistleblower center emitted an action alert calling on individuals to urge Congress to act now and reform the AML whistleblower program.

Further reading:

Congressional Budget Office Cost Estimate HR 7195

House committee approves bipartisan AML whistleblower reform bill

Now is the time for Congress to fix the AML whistleblower program

More news on AML whistleblowers on WNN

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