Whistleblower advocates were quick to raise the alarm about the recent proposed rule, implementing the Anti-Money Laundering Whistleblower Improvement Act (“AML WIA”). The advocates argue the rule, proposed by the Financial Crimes Enforcement Network (“FinCEN”), offers limited protections and could dampen incentives for whistleblowers. They also argue that it is not in keeping with Congressional intent and the actual language of the AML WIA.
On April 30th, the National Whistleblower Center submitted a 76-page rulemaking comment, detailing problems it found with the Proposed Rules. It strongly urged FinCEN to address these issues in its final rulemaking to ensure the effectiveness of the AML whistleblower program. This article is part of a series that will address the major issues identified by the NWC and explain why the success of FinCEN’s whistleblower program depends on their resolution before final rules are codified. To learn more about the
importance of the AML whistleblower program, check out the first article in this series. Find more information about NWC’s campaign here.
The Value of Rogues
FinCEN says the goal of the Proposed Rules is to combat money laundering, financing of terrorism, and other illicit finance activity by incentivizing insiders to come forward to US authorities with significant information about the schemes. Sometimes, whistleblowers with valuable first-hand knowledge of fraudulent conduct may be considered culpable by law enforcement due to their role in the illicit financial activity.
The NWC urges FinCEN to be thoughtful in balancing two aims: effectively incentivizing whistleblowers and prosecuting financial criminals. Without tools to preserve this balance, insiders with the most information about the scope, participants, victims, and ill-gotten gains of fraudulent schemes may be deterred from reporting to U.S. authorities by the threat of prosecution.
A thoughtful approach to this balance will create a positive feedback loop, the NWC argues, thereby deterring financial crime as more whistleblowers are rewarded. As the Anti-Fraud Coalition found in a 2022 report, “Paying awards to some of those [culpable] individuals both enhances the SEC’s ability to detect frauds that otherwise would go undetected and deters fraudsters who face a significant risk that one of their co-conspirators could report the fraud.”1
The NWC points out that culpable whistleblowers have contributed to some of the largest sanctions in U.S. history. Bradley Birkenfeld, a former wealth manager at UBS Group, brought to light a massive tax evasion scheme involving U.S. citizens using secret Swiss bank accounts, leading to the largest whistleblower reward at the time – $104 million from the IRS2. Birkenfeld was charged and served jail time for his role in the scheme, but without his disclosure, the fraud would have gone undetected.
“Birkenfeld provided information… that the IRS had been unable to detect, provided exceptional cooperation, identified connections between parties and transactions (and the methods used by UBS AG), and the information led to substantial changes in UBS business practices and commitment to future compliance,” the IRS stated in granting the award. “The information provided by the whistleblower formed the basis for unprecedented actions against UBS AG, with collateral impact on other enforcement activities . . .”3
The NWC highlights Birkenfeld’s story to demonstrate the importance of encouraging whistleblowers who played a role in fraud to come forward to the US authorities. Sometimes, only a whistleblower with direct involvement can provide the government with the information it needs.
Culpable Whistleblowers Under Dodd-Frank
Advocates point out that historically, other agencies’ whistleblower programs have successfully balanced the need for amnesty with the need to prosecute criminals. Th AML WIA is almost identical to the Dodd-Frank Act, which established highly successful whistleblower programs at the SEC and CFTC. According to data from the SEC and CFTC, these programs have recovered over $6.3 billion and $3.2 billion in sanctions since 2010, respectively. These programs operate under the core principle of the original federal whistleblower statute, the False Claims Act: “Use a rogue to catch a rogue.”4
In enacting the Dodd-Frank regulations, the SEC explained:
This basic law enforcement principle is especially true for sophisticated securities fraud schemes, which can be difficult for law enforcement authorities to detect and prosecute without insider information and assistance from participants in the scheme or their coconspirators…Accordingly, culpable whistleblowers can enhance the
Commission’ s ability to detect violations of the Federal securities laws, increase the effectiveness and efficiency of the Commission’s investigations, and provide important evidence for the Commission’s enforcement actions.5
A 2025 CFTC case provides an example of this balancing act. The CFTC awarded a culpable whistleblower $700,000 for having “provided key evidence and helped the CFTC interpret it,” but reduced the award amount due to their role in the scheme. Together, these choices reflect a balance between effectively incentivizing an insider and maintaining accountability for their misconduct. The reduction represents only one type of prosecutorial alternative, but whistleblower statutes and agency practice acknowledge that blanket rejection of culpable whistleblower awards is unnecessary and antithetical to enforcement goals. The SEC and CFTC examples show that this issue requires both effective regulations and thoughtful implementation.
Whistleblower Advocates Urge Thoughtful Consideration
The NWC took little issue with the language of the proposed rules on this subject, but hopes its comment will ensure that culpable whistleblowers are treated with care when the AML WIA is implemented. NWC recommends that FinCEN develop criteria to mitigate an office’s ability to initiate prosecutions inconsistent with the goals of the AML WIA and require law enforcement agencies to consult the FinCEN Whistleblower Office when determining whether to award, protect, or prosecute culpable whistleblowers. When considering whether to prosecute a whistleblower, NWC suggested to “offer tools such as a Deferred Prosecution Agreement or proffer agreement, or grant a whistleblower full immunity.”
Still, skeptics may hesitate to reward those who participate in illicit activity even if they step forward. But the AML WIA contains historically proven safeguards, argues the NWC, to prevent the most culpable whistleblowers from benefitting from reporting their own schemes. The AML WIA renders whistleblowers ineligible for awards if they are convicted of a crime in relation to the conduct they blew the whistle on. Additionally, the Proposed Rules ensure that a whistleblower’s award percentage can be reduced based on their level of culpability for the crimes. Under Dodd-Frank, the SEC and CFTC programs operate in a similar manner, with only two “culpable” whistleblowers who did not plan the fraud and took actions to stop the fraud receiving awards reduced to the lower end of the award.6
Conclusion
Potentially culpable whistleblowers are an invaluable tool for detecting illicit financial activity. Therefore, FinCEN’s regulations must incentivize the maximum number of high-quality tips from insiders who may fear prosecution in order to achieve the stated purpose of the AML WIA. If FinCEN fails to do this, it risks deterring deeply embedded sources who are on the frontlines of detecting corruption and transnational financial crime.
Leading whistleblower attorney and NWC Chairman Stephen Kohn criticized a new DOJ whistleblower program for disregarding this balance, claiming the program’s exclusion of culpable whistleblowers “would cover the overwhelming majority of the best sources of information, and would give comfort to corporate insiders knowing that their co-conspirators could not obtain an award if they turned them in.” In implementing the AML WIA, FinCEN has the opportunity to avoid this mistake.
The comment period for FinCEN’s Proposed Rules closes on June 1, 2026. The NWC launched a grassroots campaign to encourage whistleblowers, supporters, and anti-corruption advocates to comment on FinCEN’s proposed rules.
View the full list of NWC comments here.
