Money laundering and sanctions enforcement: large rewards, leniency and witness protection for whistleblowers

Abstract

Purpose With sanctions becoming an increasingly important tool in ostracising autocratic regimes from western markets, the need for effective enforcement of sanctions and anti-money laundering (AML) is increasing, and the global AML regime will be the backbone to detecting evasion of sanctions. This regime, however, has been widely criticised as ineffective. This paper aims to discuss issues with the current sanctions/AML regime and propose a reward scheme for whistleblowers to enable asset seizures that is not reliant on its effectiveness. Design/methodology/approach This paper reviews weaknesses in the global AML regime, provide suggestions on how to design whistleblower reward programmes, based on agency experience and empirical evidence, as well as elaborate on how to use such programmes in the AML context. Findings This study concludes that for reward programmes to be effective in the context of AML and sanctions enforcement, they need to include witness protection and leniency for money launderers, though not for those convicted of a criminal offence associated with the predicate crime. Moreover, rewards should be mandatory and scale with the amount of money seized or confiscated, and the cap on monetary rewards should be higher than it is under the Kleptocracy Asset Recovery Rewards Programme in the USA. Originality/value In contrast to how the USA went about implementing rewards in this area under the Kleptocracy Asset Recovery Rewards Programme, this study argues that these programmes should be designed differently. This study also provides novel advice to governments on different design dimensions in the AML context and a model with three crucial pillars along with other design dimensions that should be considered.

A Systematic Literature Review on the Roles and Ethical Dilemmas of Professional Accountant in Money Laundering

“…Beside their requisite sufficient training and competence, professional accountants must act independently and responsibly when reporting suspicious activities observed within business entities (Cindori & Petrović, 2018). Hence, to report the suspected cases independently, an effective reward program that includes whistleblower protection and immunity is important, shielding professional accountants from reprisals and threats (Sallaberry et al, 2023;Nyreröd et al, 2022). Additionally, this reward program should consider leniency for money launderers, excluding those convicted of a criminal offense associated with the predicate crime.…”

Global Developments in Trade-Based Money Laundering

“…The old system was replaced with a new one where whistle-blowers could receive as a reward worth up to 30 per cent of the fines paid by financial institutions for Bank Secrecy Act violations; and up to US$5m for information leading to the seizure, restraint or forfeiture of assets linked to foreign government corruption. Currently, in the UK, HM Revenue and Customs and the Competition and Markets Authority offer whistle-blower reward schemes, but the scale of pay-outs they provide are substantially lower than in the US (Nyreröd, et al, 2022).…”