Baker Hostetler New York partners John J. Carney and Francesca M. Harker co-authored an article titled, “Do Whistleblower Provisions Cover Money Laundering?,” which appeared in The National Law Journal on February 9, 2011.
According to the authors, The Dodd-Frank Wall Street Reform and Consumer Protection Act, at 848 pages long, is one of the largest and most sweeping financial reform legislations in recent history and it covers everything from swap markets to asset-backed securities. Two provisions of this legislation, §§ 929A and 922 (the whistleblower provisions), are certain to change the landscape of securities legislation forever. The whistleblower provisions also act in tandem to amend and expand the scope of the Securities Exchange Act of 1934 and the Sarbanes-Oxley Act of 2002, by simultaneously expanding the protections afforded to whistleblowers and the incentives to disclose.
The article cites actions brought by the SEC for money-laundering violations in In re Pinnacle Capital Markets LLC. The SEC alleged that Pinnacle willfully violated § 17(a) of the Securities Exchange Act of 1934 and Rule 17a-8, which requires broker-dealers to comply with the reporting, recordkeeping and record-retention requirements of the Bank Secrecy Act. The authors offer other insights as to how The Dodd-Frank Wall Street Reform and Consumer Protection Act will apply to money-laundering investigations. They conclude that even if the money-laundering whistleblower isn’t covered by Dodd-Frank, the complaint will still have been made and some enforcement arm of the federal government will come looking for answers. The authors encourage in-house counsel to question whether their compliance programs meet the changing regulatory environment.
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