Anti-Money Laundering (AML) Whistleblower Laws: The Complete FAQ

This FAQ is designed to help you understand the laws, agencies, and whistleblower programs that combat money laundering and sanctions evasion.

What are Anti-Money Laundering Laws?

Money laundering is the process of making illegally-obtained money appear legitimate by disguising its criminal origins through a series of complex financial transactions.

Anti-Money Laundering (AML) laws aim to prevent and punish money laundering. They also address failures by financial institutions to implement compliance programs, monitor transactions for suspicious activity, and report potential violations to federal authorities.

AML laws are important for protecting and defending against illicit finance often conducted by criminal organizations such as drug and human traffickers, corrupt government officials, and terrorists.

The United Nations Office on Drugs and Crime estimates that $800 billion to $2 trillion is laundered globally each year, which is approximately 2% to 5% of the global GDP. When criminals go unchecked, corruption flourishes – creating serious harm worldwide.

Whistleblowers, insiders with knowledge of money laundering schemes, play an essential role in AML enforcement. Their access to private information allow them to expose schemes that regulators would not have discovered.

In acknowledgement of the critical role AML whistleblowers play in enforcement, Congress has created numerous whistleblower programs which offer substantial financial awards and protections to individuals who report money laundering or other crimes.

Notably, whistleblowers are not required to be U.S. citizens to become eligible — these award programs are open to just about anyone with credible information.

The AML Legal Framework

There is not one specific AML law, but several working together. The laws have evolved since 1970, with extensive and nuanced expansions following September 11, then again in 2020-2022 when Congress strengthened AML laws once again.

Below is a historical overview of these laws:

Bank Secrecy Act (1970)

The Bank Secrecy Act (BSA), codified at 31 U.S.C. §§ 5311-5332 and implemented through regulations at 31 CFR Parts 1010-1087, is the principal U.S. money laundering law, which was originally enacted to combat organized crime and tax evasion. It now requires financial institutions to keep records of cash purchases, file reports on large cash transactions, and report suspicious activity to the government. They must also maintain AML compliance programs and adhere to the following five pillars: written internal policies and procedures, a designated compliance officer, ongoing employee training, independent testing and auditing, and risk-based customer due diligence.

[Who are these Financial Institutions? Banks, credit unions, broker-dealers, money service businesses, casinos, insurance companies, and dealers of precious metals]

Anti-Money Laundering Act of 2020

The Anti-Money Laundering Act of 2020 (AMLA) was enacted as part of the National Defense Authorization Act (NDAA) in 2021. The AMLA improved upon the BSA framework by establishing a new “beneficial ownership” reporting requirement and created a formal whistleblower award and protection program at the Financial Crimes Enforcement Network (FinCEN), a bureau of the U.S. Department of the Treasury.

[Updated March 26, 2025: All entities created in the United States — including those previously known as “domestic reporting companies” — and their beneficial owners are now exempt from the requirement to report beneficial ownership information to FinCEN]

AML Whistleblower Improvement Act of 2022

The original 2020 program had a significant weakness: awards were discretionary, not mandatory. This meant whistleblowers who provided valuable information had no guarantee of compensation, which discouraged participation.

The AML Whistleblower Improvement Act of 2022 — passed unanimously by the Senate —made whistleblower awards mandatory rather than discretionary, expanded coverage to include violations of sanctions, and established the $300 million Financial Integrity Fund to pay awards without relying on congressional appropriations.

These changes essentially transformed the FinCEN whistleblower program into one comparable to the successful of SEC and CFTC programs.

Key Terms and Definitions

Suspicious Activity Report (SAR)

A SAR is a confidential report that financial institutions are required file with FinCEN when they detect transactions that could possibly involve money laundering, terrorist financing, or other criminal activity. SARs are filed electronically through the BSA E-Filing System and failure to file required SARs is one of the most common BSA violations.

Currency Transaction Report (CTR)

A CTR is a report required for cash transactions exceeding $10,000 in a single business day. CTRs must identify the customer conducting the transaction and help law enforcement track large cash movements that may indicate money laundering or tax evasion.

Know Your Customer (KYC)

These are requirements for financial institutions to verify customer identities when opening new accounts and throughout the business relationship. KYC helps institutions understand who their customers are and detect suspicious activity.

Customer Due Diligence (CDD)

The process of understanding customer relationships, monitoring transactions, and assessing risk levels. FinCEN’s CDD Rule requires due diligence for high-risk customers such as politically exposed persons or customers from high-risk jurisdictions.

Types of Reportable Violations

The AML whistleblower program covers two categories of violations:

Bank Secrecy Act Violations

BSA violations occur when financial institutions fail to

• Meet their compliance obligations: this includes inadequate AML programs with insufficient staffing, deficient transaction monitoring, or lack of independent audits;
• Failure to file Suspicious Activity Reports when required: this includes late filings or inaccurate reports;
• Failure to file Currency Transaction Reports: this includes filing reports with missing or incorrect customer information;
• Customer due diligence failures: this includes failures such as inadequate identity verification or insufficient monitoring of high-risk customers;
• Transaction monitoring failures: this occurs where systems fail to flag suspicious patterns or deliberately narrow parameters to reduce alerts.

The TD Bank case illustrates how severe these failures can become. The bank admitted to leaving 92% of its transaction volume — approximately $18.3 trillion —completely unmonitored between 2018 and 2024, allowing criminal networks to launder hundreds of millions of dollars through its accounts.

Sanctions Violations

The 2022 amendments expanded the whistleblower program to cover violations of U.S. economic sanctions laws administered by the Office of Foreign Assets Control (OFAC).

These include the International Emergency Economic Powers Act (IEEPA), which authorizes the President to impose sanctions on foreign countries, entities, and individuals threatening national security; the Trading with the Enemy Act, governing trade with designated enemy nations; and the Foreign Narcotics Kingpin Designation Act, targeting designated drug traffickers and their organizations.

Sanctions violations can include conducting transactions with sanctioned countries, entities, or individuals; allowing sanctioned parties to use a company’s systems or services; and failing to maintain adequate sanctions screening and compliance programs.

AML Enforcement

AML enforcement is the responsibility of several federal agencies, including the Financial Crimes Enforcement Network (FinCEN), Department of Justice (DOJ), and Office of Foreign Assets Control (OFAC), and banking regulators like the Office of the Comptroller of the Currency (OCC), all of which can impose civil penalties, cease and desist orders, and other remedial measures for BSA violations and violating sanctions.

The roles of each enforcement agency:

• FinCEN: Administers BSA and operates the AML and sanctions whistleblower program. They also collect and analyze financial data from required reports, issues guidance for financial institutions, and has the power to bring enforcement actions.
• DOJ: Criminal prosecution for BSA violations, money laundering conspiracies, and other related offenses. They can also impose penalties and imprisonment and require the forfeiture of assets to recover proceeds from money laundering.
• OFAC: Administers U.S. economic sanctions programs. OFAC maintains lists of sanctioned countries, entities, and individuals, and can impose civil penalties for sanctions violations.
• OCC: Prescribes regulations, conducts supervisory activities and, when necessary, takes enforcement actions to ensure that national banks have the necessary controls in place and notify other agencies of illicit financial activity.