Federal Banking Whistleblower Programs

The Financial Institutions Reform, Recovery, and Enforcement Act of 1989 (“FIRREA”) and The Financial Institutions Anti-Fraud Enforcement Act of 1990 (“FIAFEA”) award individuals who expose fraud in the banking industry.

Following the savings and loan crises of the 1980s, Congress enacted FIRREA to address banking fraud and criminal conduct in the banking industry. The statute is unique in that it creates civil causes of action based on federal criminal laws. A year later, Congress enacted FIAFEA to encourage and incentive individuals to come forward with information about bank fraud.

Under these laws, a whistleblower can file a confidential declaration detailing the fraud in the banking industry. If the government obtains a recovery based on the information provided in the declaration, the whistleblower may receive an award of up to $1.6 million.

The two laws provide the government with broad powers, a lengthy 10-year statute of limitation and a lower standard of proof – preponderance of the evidence – than in the ordinary criminal case.  The laws allow the Department of Justice to bring a civil action for several criminal violations in the banking industry, including:

  • Money laundering violations
  • Mail & Wire fraud
  • False or misleading statements
  • Overvaluing of securities
  • Embezzlement or misapplication of bank funds
  • Concealing assets from the government
  • Poor loan underwriting/servicing violations
  • Commissions or gifts in exchange for procuring loans

The law has also been used outside of the banking industry.  For example, in March 2016, the Department of Justice issued FIRREA subpoenas to Volkswagen as part of the diesel emissions scandal. Federal prosecutors argued that concealing the defective emissions systems, Volkswagen reduced the values of their cars thus harming the banks that provide financing for those cars.