AML Compliance / Whistleblower Protection Act

Taft v. Agricultural Bank of China Ltd

Stefan Cassella of Asset Forfeiture Law, LLC reviews Taft v. Agricultural Bank of China Ltd, a recent appeal judgement which concluded that a compliance officer who suffers retaliation when she reports a bank’s failure to maintain an AML program to the Federal Reserve is entitled to file a lawsuit under the Whistleblower Protection Act.

[Taft v. Agricultural Bank of China Ltd, 2016 11 WL 2766661 (S.D.N.Y. May 12, 2016). S.D.N.Y.]

Plaintiff, the compliance officer at a bank, brought certain deficiencies in the bank’s anti-money laundering (AML) compliance program to her supervisors’ attention, and ultimately persuaded them to allow her to report the deficiencies to the New York Federal Reserve Bank. In particular, Plaintiff alleged that the bank was coding payments made on behalf of customers as if they were bank-to-bank transfers, and was thereby omitting customer-identifying information that the bank was required to include in the transmittal, such as the name, address and account number of the sender and beneficiary of the transaction.

The bank’s AML program

When the New York Fed responded in a way that was critical of the bank’s AML program, the bank retaliated against Plaintiff by transferring her to other duties and forbidding her to have any communication with the regulators. In return, Plaintiff filed a lawsuit against the bank under the Whistleblower Protection Act (WPA), 31 U.S.C. § 5328, alleging that she was penalized for providing adverse information regarding the AML program. The bank moved to dismiss the complaint on several grounds.

In an earlier opinion, the court agreed with the bank that the WPA only protects employees who make an independent report to a regulator, not an employee who persuades a bank to self-report a violation after bringing the violation to the attention of her supervisors. The court also agreed with the bank that Plaintiff’s complaint did not sufficiently allege that she acted independently and not with the bank’s approval. But the court gave Plaintiff leave to amend her complaint on this point [Taft v. Agricultural Bank of China Ltd, 2016 WL 80209 (S.D.N.Y. Jan. 6, 2016)].

In her amended complaint, Plaintiff alleged additional facts that the court said “reflect a concerted effort to stop [Plaintiff] from investigating and reporting her concerns.” Moreover, the complaint alleged that Plaintiff gave the bank “an ultimatum” stating that if the bank did not join in her report, she would make it anyway. In effect, the court concluded, the complaint alleged that Plaintiff dragged the bank to the Fed “kicking and screaming.” This was sufficient in the court’s view to allege that Plaintiff acted independently in reporting the violation.

After considering and rejecting other arguments raised by the bank – such as the bank’s claim that the New York Fed is not a “Federal supervisory agency” within the meaning of the WPA – the court denied the bank’s motion to dismiss the complaint.

Stefan Cassella, Asset Forfeiture Law, LLC 

www.assetforfeiturelaw.us