On July 21, 2010, Congress enacted one of the largest and most sweeping financial reform legislations in recent history. The Dodd-Frank Wall Street Reform and Consumer Protection Act is 848 pages long and covers everything from swap markets to asset-backed securities. Two provisions that will forever change the landscape of securities legislation are §§ 929A and 922 (collectively, the whistleblower provisions). The whistleblower provisions authorize the U.S. Securities and Exchange Commission (SEC) to pay whistleblowers between 10% and 30% of the financial penalties collected in actions in which the financial sanctions exceed $1 million. With recent fines in excess of $500 million, financial institutions and corporations must now adjust to the reality that their employees have a powerful incentive to report misconduct. But do Dodd-Frank’s whistleblower provisions include money laundering violations?

When financial institutions and broker-dealers worry about the SEC, they usually aren’t thinking about prosecutions for violations of anti-money laundering rules. But actions brought by the SEC for money laundering violations are not new and, in fact, have been on the rise recently. Just last fall, the SEC charged Pinnacle Capital Markets LLC with failing to comply with an anti-money laundering requirement that broker-dealers identify and verify the identities of Pinnacle’s customers and document its procedures for doing so.

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