2022年10月06日

Whistleblower Guidance Released by US Federal Reserve

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On September 8, 2022, the Board of Governors of the Federal Reserve System (“Fed”) released a statement that encourages whistleblowers to report certain activities at banking organizations it regulates (“2022 Guidance”).1 The 2022 Guidance is notable as one of the first interpretations by a federal banking regulator of the whistleblower provisions of the Federal Deposit Insurance Act (“FDIA”).

Banking organizations should be aware of the types of conduct that may be reported under the 2022 Guidance and the protections that apply to whistleblowers. In this Legal Update, we provide background on the whistleblower provisions of the FDIA and explain the 2022 Guidance.

Background

The Financial Institutions Reform, Recovery, and Enforcement Act of 1989 added Section 33 and 34 to the FDIA.2

Protection

Section 33 prohibits an insured depository institution from discharging or otherwise discriminating against any employee with respect to compensation, terms, conditions, or privileges of employment because the employee (or any person acting pursuant to the request of another employee) provided information to a federal banking regulator or to the US Attorney General regarding (i) a possible violation of any law or regulation or (ii) gross mismanagement, a gross waste of funds, an abuse of authority, or a substantial and specific danger to public health or safety. A whistleblower who believes that they have been discharged or discriminated against in violation of Section 33 may bring an action against their institution in federal court. The court may order the institution to (i) reinstate the whistleblower to their former position, (ii) pay compensatory damages and/or (iii) take other appropriate actions to remedy any past discrimination. The protections of Section 33 do not apply to a whistleblower who (i) deliberately causes or participates in the alleged violation of law or regulation or (ii) knowingly or recklessly provides substantially false information to a regulator or the US Attorney General.

Reward

Section 34 authorizes the federal banking regulators, with the concurrence of the US Attorney General, to pay a reward to a person who provides original information that leads to the recovery of a criminal fine, restitution, or civil money penalty under certain enumerated federal banking laws, including the National Bank Act, Federal Reserve Act, Bank Holding Company Act, or Home Owners’ Loan Act. A reward also may be paid for recoveries under the federal bank crimes laws and forfeitures that arise in connection with an insured depository institution. A reward is limited to no more than the lesser of (i) 25 percent of the amount of the fine, penalty, restitution, or forfeiture collected or (ii) $100,000. As with Section 33, a reward may not be paid to a person who (i) deliberately causes or participates in the alleged violation of law or regulation or (ii) knowingly or recklessly provides substantially false information to a regulator or the US Attorney General.

2022 Guidance

Protection

The 2022 Guidance states that the Fed encourages persons to report to it unsafe or unsound practices, violations of law or regulation, or violations of orders or written agreements by a banking organization that it regulates. It explains that there are a variety of ways for whistleblowers to make these reports and indicates that whistleblowers may elect to report anonymously.3 If a whistleblower chooses to disclose their name to the Fed, the Fed will attempt to maintain the confidentiality of their identity but may be required to disclose it (e.g., pursuant to a court order). The 2022 Guidance reiterates that whistleblowers under Section 33 are protected from retaliation and instructs those who are aware of retaliation to report it to the Fed.

Reward

The 2022 Guidance also describes the reward provisions of Section 34. It confirms that payment of a reward is a discretionary act of the Fed and US Attorney General (which, under the terms of Section 34, is not subject to judicial review). It also states that the Fed will not make a determination regarding a potential reward until the conclusion of any action related to the information provided by the whistleblower. It does not clarify if the Fed will announce the payment of these awards, such as is done by the Securities and Exchange Commission and Commodity Futures Trading Commission.

Conclusion

There may be renewed interest in Sections 33 and 34 because of the inclusion of similar provisions in the Anti-Money Laundering Act of 2020. While the two regimes target different issues, they focus on the activities and personnel of banking organizations. Banks should be aware that whistleblowers that are not covered by one regime (e.g., Sarbanes-Oxley and Dodd-Frank for public companies) may be covered by another (e.g., Section 33).

Banking organizations should recognize that the protections of Section 33 may apply even if a regulator does not prove that an institution violated the law. Therefore, even if an institution is certain that it has not broken the law, it should ensure that it does not retaliate against someone for whistleblowing.

Lastly, the 2022 Guidance signals an interest from the Fed in whistleblower reporting. Large institutions should expect questions from examiners regarding conduct that has been reported by whistleblowers even if the existence of the whistleblower report is not disclosed. And an institution should consider retaining counsel if unsure how to respond or unable to respond promptly to an examiner.

 


 

1 Federal Reserve, SR 22-7 (Sept. 8, 2022), https://www.federalreserve.gov/supervisionreg/srletters/SR2207.htm.

2 Pub. L. 101-73, title IX, §§ 932-933, 103 Stat. 494 (1989) (codified at 12 U.S.C. §§ 1831j, 1831k).

3 The 2022 Guidance explains that whistleblowers who originally reported their information anonymously may also seek a reward. However, they must also provide information related to their original submission of information sufficient to corroborate their identity as the whistleblower.

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