OFAC Signals Willingness to Use FinCEN Whistleblower Incentive Program for Sanctions Violations

The U.S. Department of the Treasury’s Office of Foreign Assets Control (OFAC) has announced two enforcement actions this year. Both reference the Financial Crimes Enforcement Network's (FinCEN) whistleblower program, signaling OFAC’s willingness to rely on whistleblowers as another source to initiate investigations into possible sanctions violations.

The apparent shift underscores the heightened risk of noncompliance with U.S. economic sanctions in a period where the U.S. government increasingly focuses on enforcing national security regulatory programs. As a result, companies should consider maintaining robust compliance measures, disclosing potential violations discovered internally and nurturing a culture of compliance within the organization.

How We Got Here

Since the Anti-Money Laundering Act of 2020 established the whistleblower program, it has been associated primarily with the Bank Secrecy Act. The Anti-Money Laundering Whistleblower Improvement Act expanded the program in late 2022 to cover whistleblowers who report violations of OFAC-administered sanctions.

Last year, two of seventeen announced OFAC enforcement actions referenced the whistleblower program. The fact that both OFAC enforcement actions announced this year cite the FinCEN whistleblower program reflects increased inter-agency collaboration. It may also signal the Treasury Department’s willingness to award whistleblowers significant monetary awards for providing information that leads to successful sanctions enforcement actions by OFAC.

Under the program, robust anonymity and anti-retaliation provisions protect whistleblowers. In cases where a whistleblower’s report leads to enforcement actions resulting in monetary sanctions exceeding $1 million, the whistleblowers may be eligible for 10% to 30% of the monetary sanctions the U.S. government collects.

Understanding the Change

Congress reportedly put pressure on FinCEN to implement the program fully in early 2024, which may explain the new emphasis on the program in OFAC web postings about recent settlements.

FinCEN appears to process tips under the whistleblower program and refer them to the relevant agencies. FinCEN Director Andrea Gacki has stated that since the beginning of 2024, FinCEN had received over 100 tips, which were processed and referred to OFAC and other agencies.

FinCEN expects to formalize the whistleblower program rules with a Notice of Proposed Rulemaking in 2024, according to Gacki.

Implications for Compliance: What Companies Should Consider Doing

The number of sanctions tips may now increase, elevating the risk of discovery and enforcement for non-compliance. With OFAC’s encouragement, individuals may have a greater incentive to report sanctions violations, putting increasing pressure on U.S. and non-U.S. parties’ OFAC compliance efforts.

Even if many of these sanctions tips do not result in successful enforcement, companies may still have to respond to subpoenas or other inquiries from OFAC and ensure compliance with whistleblower protection rules.

Companies should consider:

• Maintaining robust compliance measures to detect and prevent potential violations of U.S. sanctions, working with legal counsel to evaluate the adequacy of existing compliance safeguards.
• Disclosing instances where potential violations are identified internally, avoiding an additional layer of complexity triggered by whistleblower reporting.
• Nurturing a culture of compliance within the organization by:
  • Encouraging employees to use internal mechanisms to report potential sanctions violations.
  • Educating employees on detecting and internally raising red flags potentially associated with U.S. sanctions violations.