CFTC Issues Record $30 Million Fine for Spoofing to Deutsche Bank


The CFTC announced enforcement actions against three banks and six individuals for spoofing at the end of January. The three banks, Deutsche Bank, UBS, and HSBC, were charged with spoofing in precious metals futures contracts trading on the Commodity Exchange, Inc. (COMEX).

The fine against Deutsche Bank was the largest imposed by the CFTC to date for spoofing-related misconduct. The cases were investigated and filed by the CFTC Enforcement Division’s Spoofing Task Force, a new coordinated effort to handle this type of market manipulation.

Deutsche Bank and a subsidiary agreed to pay a $30 million civil monetary penalty. UBS AG agreed to pay a $15 million civil monetary penalty. The HSBC Securities (USA) Inc. involved the conduct of one trader in the New York office and HSBC agreed to pay a $1.6 million civil monetary penalty.

A statement by CFTC Director of Enforcement James McDonald indicated that the UBS self-reported the misconduct and that the fine for each of the banks would have been substantially higher if not for their substantial cooperation.

Spoofing is a type of market manipulation through technology that uses electronic and algorithmic trading to inject false information into the market that distorts prices and tricks others into trading at the manipulated prices. The anti-spoofing provision in the Dodd-Frank Act made it illegal to bid or offer with the intent to cancel the bid or offer before execution in the commodities market. The SEC has had the authority to punish spoofing through a civil fine since the 1930s.

The civil complaints against the individuals involved three cases of spoofing for major banks, two individuals who engaged in spoofing at proprietary trading firms, and one individual (as well as the company) that built a program designed to spoof the market. The market manipulation happened in some of the most heavily traded futures contracts in the world.

McDonald renewed the CFTC’s commitment to facilitate electronic trading and other new market opportunities while holding wrongdoers accountable and deterring future misconduct. This includes individual actions against those who teach others how to spoof, build tools designed to spoof, and otherwise aid and abet wrongdoing.

Spoofing has been an area of focus at the CFTC over the past few years as it implemented the Dodd-Frank Act and began bringing civil and criminal enforcement actions. The $46.6 million in settlements, from the January actions, is the largest to date.

There was no mention in the press release about how the CFTC came to be aware of the misconduct by DB and HSBC. The CFTC will soon issue Notices of Covered Action alerting any CFTC whistleblowers to file a claim for a reward. If a whistleblower alerted the government or provided substantial assistance during the investigation, the individual may be eligible for a reward of between 10 and 30 percent of the fine.

If you have evidence of a bank division or other trading professional engaged in spoofing of the futures or commodities markets, call McEldrew Young at 1-800-590-4116 to speak to a whistleblower attorney about reporting it.

Latest Settlement Reveals Mortgage Fraud Continued Years After Financial Crisis Ended


We are reaching the end of a decade since mortgage fraud hit its peak in 2007. However, the latest settlement by IberiaBank suggests that at least one lender continued aspects of mortgage fraud against the Federal Housing Administration (FHA) well after becoming informed of their wrongdoing.

IberiaBank agreed to pay the United States more than $11 million in response to allegations that it did not comply with federal requirements on FHA mortgage loans. The settlement resulted from allegations made under the False Claims Act by whistleblowers who were formerly employed at the bank.

Similar to other allegations against banks during the financial crisis, IberiaBank admitted that certain loan files contained inadequate documentation on income, inadequate verification of the down payment, and unresolved appraisal discrepancies.

The most disturbing part of the allegations is that the bank told HUD that it was no longer paying underwriter commissions after a HUD review in 2010 notified IberiaBank that it was not in compliance with a prohibition on underwriter commissions. Nevertheless, the bank did not disclose that it was making incentive payments to underwriters. These payments continued to be made by the bank until 2014. As a result, the period of covered conduct for the settlement was from the beginning of 2005 until the end of 2014.

IberiaBank is not the only one to be in the news recently for problems in its mortgage department. Wells Fargo is in the process of refunding rate-lock extension fees assessed to mortgage borrowers where the delay was due to its practices. President Trump recently denied media reports that the U.S. was going to let Wells Fargo off the hook without a fine for falsifying records to blame the mortgage-processing delays on the consumers borrowing money. Instead, President Trump suggested in a tweet that while he has promised to cut regulations, penalties for those caught cheating would be severe.

According to media reports, Wells Fargo said that it assessed around $98 million in rate-lock extension fees, although it contends some of those were legitimate. Wells Fargo has already paid around $200 million in fines and penalties following allegations which emerged last year that it opened millions of fake accounts on behalf of customers.

If you are a current or former mortgage industry professional with evidence of lending fraud involving FHA loans, call our mortgage whistleblower attorneys at 1-800-590-4116 for a free, confidential initial consultation.

SEC Chief Says Cybersecurity is a Top Priority


SEC Chair Jay Clayton declared cyber security one of the top enforcement issues at the securities regulator on Tuesday, according to a Reuters article. In line with this comment, we expect that there will be an uptick in the number of rewards to whistleblowers who report cyber security problems that violate securities laws.

It has been a few months since we have talked about cybersecurity here, but it is back on our radar because of the announcement from Equifax yesterday that the personal and financial information of 143 million Americans was compromised this year.

This seems like an undeniable area for more whistleblowing in the future. Investment banks and hedge funds are an obvious target of hackers, and it seems unlikely that one of the largest will be able to escape making a breach announcement at some point similar to the one Equifax did earlier this week.

Clayton described the problem as substantial and systemic, as well as not one that the investing public fully understands.  Former SEC Chair Mary Jo White made similar comments last year about the importance of this area, calling cybersecurity the biggest risk to the financial markets.

Cybersecurity implicates a number of issues in securities law:

1. Insider trading: Hackers that steal information to gain a market advantage. There have already been reports of individuals trading on information stolen from various large corporate vendors, such as press release services and top mergers and acquisitions law firms. The current laws against insider trading reach this conduct as they protect against the use of material nonpublic information to the disadvantage of other investors.

2. Sensitive Information: Financial firms have a duty to protect sensitive client information. If an investment bank is hacked and client information taken, they will be subject to fines if they did not take reasonable steps to safeguard the client information in the first place. The most egregious cases will the fact that this is a developing area,

3. Disclosures: Publicly traded companies are required to provide accurate disclosures to investors about material events in the business. If a corporation hides a breach from the public or delays reporting to its investors in order to avoid the negative publicity and hit to its stock price, then the SEC would be within its power to step in and fine the company.

4. Market Access: If a hacker were to illegally take control of the computer systems of an investment bank or hedge fund with substantial assets, it could wreak havoc on asset valuations.

All of these issues could become the subject of whistleblower tips. The Dodd-Frank Act authorizes the SEC to pay rewards of between 10 and 30 percent of the government penalties in cases where they exceed $1 million. While government enforcement efforts are likely to resist overreaching in a developing area, comments like this from Jay Clayton suggest that cybersecurity tips from whistleblowers will be welcomed.

Spoofing Case Results in CFTC’s First Non-Prosecution Agreements


In January, the CFTC settled its first civil enforcement action against a bank for spoofing when Citigroup agreed to pay a $25 million fine for sending orders into the U.S. Treasury futures market with the intent of canceling them. Now, the CFTC has entered into its first non-prosecution agreements ever, making deals with three traders who engaged in wrongful conduct but served as cooperating witnesses in that case.

The Dodd-Frank Act declared spoofing illegal as a form of manipulative trading under the Commodity Exchange Act. The agency received its first conviction in a spoofing prosecution against a U.S. trader in 2015. It has brought several other actions under the law, including a high profile action against a UK trader who allegedly contributed to the May 6, 2010 flash crash in the stock market.

The order in January alleged that Citigroup subsidiary Citigroup Global Markets had five traders working on its U.S. Treasury and Swaps desks send 2,5000 orders to the CME with the intent to cancel them before execution. The employees were engaged in spoofing to ensure that its smaller, resting orders on the other side of market (from the spoofed orders) received quicker execution. The order alleged that the investment bank inadequately trained its employees on the law and had inadequate systems and controls in place to detect spoofing by its traders. A head trader reportedly knew of at least one incident of spoofing because a trader lost money on an order that was partially filled before canceled, and admitted to spoofing, but no one reported it to compliance or any other senior manager.

The NPAs announced in late June about five months after the settlement are the first entered into by the CFTC. The Director of Enforcement James McDonald anticipates NPAs will be an important part of incentivizing extraordinary cooperation against wrongdoing in particular cases in the future. McDonald said that cooperating witnesses can help identify more culpable wrongdoers and hold them accountable. In order to receive the NPA here, each trader had to admit to engaging in spoofing. Both the SEC and the Justice Department have previously entered into non-prosecution agreements.

Our CFTC whistleblower attorneys represent individuals reporting violations of the Commodity Exchange Act and CFTC rules. Call 1-800-590-4116 for a free, confidential initial consultation.

Reverse Mortgage Whistleblower Gets $1.6 Million FIRREA Award


The $89 million settlement in May between Financial Freedom and the United States regarding claims under the False Claims Act and the Financial Institutions Reform, Recovery, and Enforcement Act of 1989 resulted in a $1.6 million bounty for a FIRREA whistleblower.

The United States alleged that Financial Freedom failed to meet certain obligations to FHA as a mortgage insurance provider on their reverse mortgage loans. Financial Freedom collected interest from the FHA despite failing to obtain an appraisal within 30 days of the reverse mortgage becoming due and payable. Services that miss the 30-day appraisal deadline before a foreclosure are not entitled to interest that accrues after the loan becomes due.

This is the first FIRREA whistleblower award that I have seen confirmed in a Department of Justice press release. For some time, the law initially developed in response to the savings and loan crisis, went unused. It was reinvigorated following the Great Recession when it became the primary theory for prosecution of mortgage fraud.

It has since seen expanded utilization in other areas. In 2014, the DOJ issued subpoenas to two large subprime auto lenders investigating whether their origination and securitization practices violated FIRREA. In 2016, Volkswagen was charged with violations of FIRREA for the use of defeat devices to cheat on emissions tests. It ultimately settled these allegations for civil penalties of $50 million.

The reverse mortgage award demonstrates the substantial difference between the award structure for awards under the False Claims Act and FIRREA. The award of $1.6 million was paid under FIRREA. FIRREA has a different payout structure compared to the False Claims Act and a maximum award of $1.6 million. There is no maximum award under the False Claims Act. Under it, any award would have been between 15 and 25 percent of the recovery (for an intervened lawsuit). This would have resulted in a minimum payout of $13.3 million (assuming that the individual met the requirements under the law).

Former Attorney General Eric Holder, before he left the office, suggested in a speech at NYU School of Law that FIRREA should be amended to lift the maximum available award. Holder called 1.6 million “a paltry sum in an industry in which, last year, the collective bonus pool rose above $26 billion, and median executive pay was $15 million and rising.” As far as we are aware, Congress has not attempted to increase the maximum award recently.

Record Award Predicted for SEC Whistleblowers from JPMorgan Fine


A media outlet, Financial Planning, is predicting that a pair of SEC whistleblowers will share an award of approximately $70.6 million out of the $307 million in regulatory fines against JPMorgan in 2015. Another outlet, Advisor Hub, put the number at $61 million instead. Either award amount would be the largest in the history of the SEC whistleblower program to date.

The SEC whistleblower program is authorized by the Dodd-Frank Act to pay awards of between 10 and 30 percent of the amount the United States recovers as a result of a tip. The top award previously was announced in September 2014 and totaled approximately $30 million.

It looks like the discrepancy between the two numbers reported by the media outlets results from the calculation of the overall amount of fines against JPMorgan. Financial Planning is counting both the SEC fine of $267 million as well as the CFTC fine of $40 million. Advisor Hub is counting only the SEC settlement. It seems probable that the larger number is correct and that the CFTC waward

Any award announcement is still probably months away. The calculations are based on a leaked preliminary award determination. The number of whistleblowers, percentages and their allocation can still change as the parties are permitted time to dispute the preliminary determination.

The settlement with JPMorgan was announced in December 2015. Two JPMorgan wealth management subsidiaries agreed to admit wrongdoing and pay $267 million to the SEC and $40 million to the CFTC for the failure to disclose conflicts of interest to clients. The subsidiaries had a preference for clients to invest in the firm’s own proprietary products which it did not disclose to them. The SEC said that the preference deprived clients of information that they needed to make fully informed investment decisions with respect to asset allocation and the selection of fund managers.

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How 700 Bank Whistleblowers Get Ignored


Like much of America, we have been following the story of Wells Fargo’s sales tactics and the government response to it. We haven’t discussed this matter in depth yet here on our blog (just a brief comment about its implications for whistleblower retaliation), so I thought we would discuss it following the media reports that the Feds knew of 700 whistleblower complaints at the bank in 2010 regarding its sales practices.

Our whistleblower attorneys speaks regularly with employees and ex-employees of corporations of all sizes after the individual has internally reported suspected wrongdoing and the business has failed to adequately address their concerns. It is not surprising at all to us that tips would be ignored by a company. If large corporations corrected violations of the law after learning about them from their employees, we would not be in the practice of whistleblower law because there would be no need for us.

We also understand how these tips could be packaged together, explained away by the company and dismissed upon Government review. But we will discuss that more below.

Since we haven’t posted on this topic before, let’s briefly recap what has happened. Wells Fargo was fined $185 million, including a $100 million penalty by the Consumer Financial Protection Bureau, last September for fraudulently opening customer accounts. The practice involved as many as 1.5 million bank accounts and 565,000 credit card applications opened without the customer’s consent over a period dating back to at least 2011. Recently revealed evidence suggests it may have been going on since at least 2004 or 2005. It also agreed to settle a class action by consumers regarding the practices for $110 million.

After the practice became public, several ex-employees came forward to discuss their whistleblowing. Between 2009 and 2014, at least five former Wells Fargo employees notified OSHA that they were fired due to concerns about the opening of unauthorized accounts and credit cards. OSHA has recently ordered Wells Fargo to rehire one former manager and pay $5.4 million for its whistleblower retaliation, the largest award ever issued by the agency for an individual whistleblower.

There have been a great deal of investigations concerning the practices at Wells Fargo, both from government agencies and Wells Fargo. Two reports, one from Wells Fargo and one from the government regarding how to improve its regulatory oversite, have been released recently.

A few weeks ago, the Independent Directors of the Board of Wells Fargo put out a 113 page investigation report on sales practices. It examines in substantial detail the roles of numerous individuals and entities within Wells Fargo.

Unfortunately, there is so much evidence in the report that everyone knew Wells Fargo had a problem (at least as early as the December 2013 Los Angeles Times report), that it doesn’t spend much time on the issue of how it could improve its handling of whistleblower tips. Indeed, the most substantial examination of a whistleblower matter is on page 75 concerning a 2011 letter by a group of terminated bankers and tellers from a California branch to then CEO John Stumpf claiming they were unjustly terminated for practices condoned by branch management and happening across the bank.

The report does announce a few organizational changes which may impact how whistleblower issues are treated. It highlights the creation of a new Office of Ethics, Oversight and Integrity (with oversight by the Board’s Risk Committee). It also notes on page 17 that the Board’s Human Resources Committee will increase its oversight of terminations and the EthicsLine implementation.

This may not be the only report put out by Wells Fargo so it is possible one will follow later about changes to its handling of whistleblower tips. Wells Fargo has undertaken efforts to review non-anonymous calls to its confidential ethics line over the past five years to determine whether the employees were terminated within a year of the call. It is not yet known whether it will release publicly the details of that investigation.

The report that triggered the media focus on 700 whistleblowers was issued by the Office of the Comptroller of the Currency (OCC). The OCC is the primary regulator of banks chartered under the National Bank Act and Wells Fargo falls within its Large Bank Supervision operating unit. The Office of Enterprise Governance and the Ombudsman at the OCC completed its internal report two days ago and provided its lessons learned in the aftermath of the revelations about sales practices at Wells Fargo. Much of that report focused on what went wrong with the handling of tips from whistleblowers. It was a shorter document however (13 pages if memory serves).

The OCC report found Wells Fargo had issues with the handling of both consumer complaints and whistleblower cases. Among other things, Wells Fargo failed to document resolution of whistleblower cases and failed to follow up on significant complaint management and sales practices issues. When asked in 2010 about a high number of complaints by the Government, a Wells Fargo Senior Executive Vice President said that company culture generated a high volume of complaints and then they are investigated and addressed.

The OCC itself received 14 whistleblower tips about sales practices from mid-March 2012 to early September 2016. Just over 50% had no documentation in the regulator’s system. Both whistleblower tips and consumer complaints at the OCC are taken in by the Customer Assistance Group (CAG).

The report made numerous suggestions to improve the OCC and prevent a similar situation from happening again. Among the suggestions were for periodic review and analysis of complaints and whistleblower cases, as well as greater efforts to inform the public how to communicate whistleblower information to the OCC.

After this somewhat long review, we are back at the central issue here: how and why whistleblowers get ignored.

1. They don’t consider it a material issue for the company.

Wells Fargo reported $88.26 billion in revenue in 2016. To resolve the allegations concerning what was a massive multi-year violation of the law cost roughly $300 million. At some point, perhaps it should be said (like at many Wall Street investment banks) that government fines like these are just a cost of doing business. Wells Fargo saw 1% of its staff was being dismissed every year for bad sales practices and thought that number was great because 99% were acting ethically.

2. Lack of focus.

We speak to a great number of people that feel every violation of the law, no matter how small, is a vital national issue. As a result, they lump together both important and unimportant matters when they blow the whistle. When highly speculative matters of minor importance get tossed out in the same breath as serious violations of the law, it makes everything less credible.

3. Poor articulation of the details.

The law is complex. So are the factual scenarios that can arise. When non-lawyers try to explain violations of the law, they often oversimplify the facts and the law. If it is not articulated properly, it can be unconvincing. There may be various shades of grey obscuring a black and white violation of the law.

4. No documentation.

In the electronic age, documents matter. If there is no evidence presented, it is harder to disprove witness statements to the contrary.

5. Aggregation of reports.

It sounds like the government was working from a company summary of the EthicsLine complaints. If there was a detailed accounting and investigation of each incident, it would not have been so easy to dismiss. Aggregation hides the severity and specificity of events where the details matter.

6. Many don’t have lawyers.

Would you take an anonymous call from a random employee as seriously as you would a complaint from a high powered attorney seeking money on behalf of a specific client? There is a reason that the EthicsLine is handled by HR and not the Legal Department. Those that do get lawyers are dismissed as disgruntled employees.

7. The tone at the top is wrong.

When the focus is always on meeting advancing sales targets, compliance takes a back seat. This includes investigations of high performers accused of wrongdoing.

8. There’s no fear of the consequences.

“Everyone is doing it.” This isn’t a big deal.

9. Too many excuses.

The report details how Wells Fargo was overrun by individual wrongdoers to the point where it became a systemic and widespread problem. It failed to change the underlying causes of this behavior or the systems that allowed it to happen. Instead, they ended up firing more than 5,000 bad apples before the Government stepped in to say enough is enough.

A Proposed Solution

There is a way to get rid of the excuses and put more power in the hands of whistleblowers. It is not mentioned by the OCC report. But it is what happened at the SEC. Congress passed the Dodd-Frank Act to reward whistleblowers that come forward. It created a department within the SEC to ensure that whistleblowers had advocates. This program has been a success, paying out more than $100 million in rewards in the first six years.

This was the result of the ponzi scheme by Bernie Madoff. Despite a whistleblower tip, the SEC missed it. So Congress gave whistleblowers a monetary incentive to come forward. Now, investment banks are well aware of the SEC whistleblower program. If they are not taking internal employee whistleblower tips seriously, they do so at their peril.

There has been much discussion about rewarding bank whistleblowers. Former NY Attorney General Eric Schneiderman even proposed legislation in New York State to protect and reward banking, insurance and financial service whistleblowers in 2015.

FIRREA would be one mechanism for the federal government to do so. FIRREA is the Financial Institutions Reform, Recovery and Enforcement Act. It currently provides rewards of up to $1.6 million for whistleblowers providing information about fraud against federally insured financial institutions. Before leaving office, former Attorney General Eric Holder told an audience at New York University School of Law that lifting the cap would significantly improve the Justice Department’s ability to gather evidence of wrongdoing in complex financial crimes. FIRREA has been getting increasing usage both as a tool against mortgage fraud and even cases of consumer fraud involving auto loans. It makes sense to expand it.

It should come as no surprise that we would support this solution. When Congress wanted to put a stop to delayed product recalls, it gave the Transportation Secretary the power to pay auto whistleblower rewards and increased potential fines from the NHTSA. Doing the same for bank whistleblowers would give the OCC a substantial incentive to take control of its whistleblower process and employees to gather the evidence needed to put a stop to Wells Fargo type practices earlier.

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Barclays Whistleblower Process Disappoints


The Justice Department is reportedly investigating efforts by Barclays CEO Jes Staley to unmask a whistleblower who sent two anonymous letters to the bank’s board of directors complaining about the hiring of a mid-level executive. Barclays reportedly asked the U.S. Postal Service for assistance in tracking down the sender of the letters, though it claims that it never learned the identity of the individual. It is now being investigated for possible criminal charges and/or violations of the Dodd-Frank Act. The New York State Department of Financial Services is also investigating.

Barclays, based in the United Kingdom and operating in the United States as well as many other countries, falls under a wide range of regulations that protect whistleblowing. U.K., for example, requires big banks to permit employees to raise issues in confidence and appoint a whistleblowing champion among senior managers. Clearly, this message has not been conveyed to the top levels of management, since Barclays internal investigation has concluded the CEO honestly but mistakenly thought he was permitted to track down the sender of the letter.

This obviously doesn’t bode well for whistleblowers. Despite both anti-retaliation protections and an internal whistleblower champion, the CEO of the 16th largest bank in the world (measured by total assets in 2016 by Relbanks) failed to respect the whistleblower process. And what happened to the whistleblower champion? The whistleblower is fortunate that he or she didn’t trust the bank’s internal process and mailed the letter anonymously.

This conduct unfortunately does not surprise us. We have been disappointed more than once by the conduct of large corporations with respect to whistleblowers. It is for this reason that we suggest all employees secure a lawyer before complaining of corporate wrongdoing, whether internally or externally. The laws and regulations are complicated and you do not want to make a mistake that leaves you open to retaliation without a remedy.

We hope that the U.S. Government will send a message to Barclays. The fact that they are investigating the bank for improprieties with respect to this employee is in and of itself a step in the right direction.

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State Street to Pay Gov’t $382 Million Over Hidden FX Markups


Hidden costs imposed by banks on trading clients are at issue again today with the Securities and Exchange Commission announcing a $382.4 million settlement with State Street over misleading mutual funds and other custody account clients.

A custody bank holds assets and securities for safekeeping. This includes stocks, bonds and commodities. As part of these duties, it may arrange for settlement of transactions involving these assets and securities.

In the case of State Street, it offered customers the ability to buy and sell foreign currencies when needed to settle transactions involving foreign currencies. These services are known as Indirect FX because the client is not speculating on the movement of the currency – they are only transacting in the currency in order to complete the desired result for a transaction which would otherwise leave them owning a foreign currency. On these trades, State Street told customers that they would provide best execution and competitive market rates.

Instead, State Street charged its customers set prices based on uniform markups and failed to give customers the best possible prices. For misleading customers, the SEC will find that State Street violated portions of the Investment Company Act of 1940. In total, the SEC penalties, disgorgement and interest totaled $167.4 million.

The settlement also involved a resolution of potential charges by the Justice Department and the Department of Labor. The Labor Dept. protects ERISA plan clients (retirement accounts).

The government investigations reportedly started after whistleblowers alerted multiple authorities to the losses by public pension funds.  A group called Associates Against Insider FX Trading, which includes Bernie Madoff whistleblower Harry Markopolos, filed lawsuits across the country years ago.  It is unclear yet whether an award will be issued either under the False Claims Act or through the SEC whistleblower program.

The False Claims Act offers 15 to 30 percent of the government’s recovery to the relators.  However, the scope of the applicable penalty is unclear since it would turn on the definition of “alternate remedy“.  The potential for an award based on the total government fine would be better under the SEC program, which allows for rewards based on “related actions”.

State Street has additionally reserved almost $150 million to settle private class action lawsuits by customers.

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SEC Boosts AML BSA Enforcement with SARs Action


A piece of news about Vincente Martinez leaving the SEC alerted us to the first SEC enforcement action of the Bank Secrecy Act against a broker-dealer solely for failing to file suspicious activity reports (SARs) on time.

Martinez was the original Director of the CFTC Whistleblower Office before returning to the SEC in 2013. Martinez served as the Chief of the Office of Market Intelligence since 2013. OMI is located within the enforcement division and initially reviews tips from SEC whistleblowers. Victor J. Valdez will be the Acting Chief of OMI after Martinez leaves next month.

OMI also works with the Broker-Dealer Task Force to identify potential firms failing to file suspicious activity reports (SARs). It was a news article by Compliance Week on Martinez and OMI that alerted us to the $300,000 settlement of an enforcement action for failing to file SARs when appropriate.

Although the penalty wouldn’t be enough to trigger a whistleblower award, where there is a $1 million minimum in monetary sanctions, it is evidence that money laundering reporting is increasingly on the SEC’s radar.

Past sanctions have involved the enforcement of other federal securities laws in addition to fines for anti-money laundering (AML) violations. For example, in January 2015, the SEC and the Treasury Department’s Financial Crimes Enforcement Network (FinCEN) fined Oppenheimer & Co. a total of $20 million, with half the results of failure to file SARs.

New York has also stepped up its Anti-Money Laundering regulation recently, as the New York Department of Financial Services has issued rules in this area effective January 1, 2017. If NY was also to pass the previously considered bank whistleblower reward legislation, this could be a big boon to whistleblowers working in compliance at New York banks.

Back in 2013, a few U.S. Representatives introduced into Congress a bill to provide greater rewards to money laundering whistleblowers, called the Holding Individuals Accountable and Deterring Money Laundering Act. The bill was also introduced into the 114th Congress (2015-2016) by Representative Maxine Waters of California. The bill is modeled after the SEC whistleblower provisions in the Dodd-Frank Act, providing for rewards of between 10 and 30 percent of the monetary sanctions recovered.

FinCEN is only currently authorized to pay up to $150,000 to whistleblowers for information about violations of the Bank Secrecy Act.

We’ll put this legislation on our radar to see if it moves through Congress to increase the rewards offered.  To speak to our whistleblower attorneys about this information or for an evaluation of a potential submission, please call 1-800-590-4116.

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