Whistleblowers Can Help Stop Sanctions Evasion
In response to Russia’s unprovoked aggression against Ukraine, which culminated in Russia’s invasion of Ukraine in February 2022, the United States has enacted sweeping sanctions against Russian oligarchs, government officials, and entities operating in key sectors of Russia’s economy. These sanctions, which are enforced by the Department of Treasury’s Office of Foreign Assets Control (OFAC), ensure that Russian oligarchs do not enjoy U.S. resources, that U.S. products do not wind up in Russian military equipment, and that the U.S. financial system is not used to facilitate transactions that support the Russian war effort. However, there are individuals and corporations working to evade sanctions for their personal profit. And they are aiding Russia’s war against Ukraine by doing so.
The United States has made clear that enforcing Russian sanctions is a high priority. In March 2022, the Department of Justice launched two task forces—Task Force KleptoCapture and Russian Elites, Proxies, and Oligarchs (REPO) Task Force—dedicated to catching wrongdoers undermining the government’s efforts to stop Russian military aggression. By February 2023, the United States had taken hold of over $500 million in assets belonging to Russian oligarchs and others who “evaded U.S. economic countermeasures.” But there is only so much the government can do on its own. There are simply too many sophisticated bad actors. As in every area where there is fraud, whistleblowers are needed to alert the government to sanctions violations and show officials how the scheme is being perpetrated.
Thanks to the Anti-Money Laundering (AML) Whistleblower Program, which was significantly strengthened at the end of 2022, individuals can receive an award for blowing the whistle on individuals and companies that evade sanctions like those imposed against Russia. Under the amended program, whistleblowers who do so will have their identity protected and be guaranteed a minimum financial award if the government recovers over $1 million resulting from their information. These measures are similar to the highly successful Securities and Exchange Commission Whistleblower program, which has recovered over $6.3 billion from wrongdoers and paid over $1.3 billion in whistleblower awards since its start in 2011.
Potential whistleblowers should take note of the AML Whistleblower Program’s broad geographic reach. Like other U.S. whistleblower programs, individuals do not have to be from the United States to receive an award. Similarly, OFAC has the power to punish foreign individuals and entities for violating U.S. sanctions if they make use of the U.S. financial system, U.S. entities, or U.S. individuals when doing so. Even the slightest connection to the U.S. market is enough for OFAC to penalize a foreign company for violating U.S. sanctions. For example, if a foreign company uses U.S. dollars to transfer funds to a foreign sanctioned entity, OFAC can—and has—enforced civil penalties against the foreign company, even though the only connection to the United States was the dollar payment.
In advocating to the United States Senate for the stronger AML Whistleblower Program, Taxpayers Against Fraud (TAF) cited individuals who did not report sanctions-violating activities, including an investment advisor who knew of a Russian government official using U.S. shell corporations to move money across bank accounts. TAF noted that these potential whistleblowers did not step forward because attorneys could not assure that they would be protected under the program or that they would receive an award if the government recovered money resulting from their information. Those shortcomings have now been rectified. Congress’ willingness to make this amendment is an important signal to whistleblowers who know about sanctions evasion that there are now protections in place when they come forward to help the government enforce sanctions.
Courtney Finerty-Stelzner is an Associate at Getnick Law.
