WHISTLEBLOWER REWARD PROGRAMMES

QUERY SUMMARY

Can you provide information on whistleblower reward Several countries, such as the U.S., Canada and
programmes? Which countries have such reward South Korea, have introduced whistleblower reward
programmes in place and what are the main programmes that aim to increase the quantity of
features? Is there any research showing the disclosures about cases of corruption, fraud,
effectiveness of such a reward system, that is, are misconduct and other illegal activities.
people more likely to blow the whistle if a reward is
offered or not? These mechanisms award whistleblowers with a
payment if their information leads to successful
prosecution or recovery of funds. Some analysis
CONTENT suggests that these programmes are successful as
they incentivise individuals or groups to come
forward with information and counter-balance the
1. Rationale for introducing financial incentives for
possible dangers of blowing the whistle.
whistleblowing
2. Main features of reward programmes
However, another school of thought suggests that
3. Country examples
reward systems can create perverse incentives,
4. References
leading to negative effects such as a rise in false
reports. This Helpdesk answer provides an overview
of reward programmes and examples of countries
\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\ that have enacted the legislation.

Author(s)
Caitlin Maslen
tihelpdesk@transparency.org

Reviewer(s)
Charlotte Dawirs and Matthew Jenkins, Transparency
International, tihelpdesk@transparency.org

Date: 27 September 2018

© 2018 Transparency International. All rights reserved.

This document should not be considered as representative of the Commission or Transparency International’s
official position. Neither the European Commission,Transparency International nor any person acting on
behalf of the Commission is responsible for the use which might be made of the following information.

This Anti-Corruption Helpdesk is operated by Transparency International and funded by the European Union.
 WHISTLEBLOWER REWARD PROGRAMMES

1. RATIONALE FOR INTRODUCING cultures hold a negative view of informants, with

FINANCIAL INCENTIVES FOR connotations of 'sneaks' or 'spies'. Cultural influence,
a fear of victimisation and lack of trust in management
WHISTLEBLOWING
are among the major deterrence to whistleblowing
(Ayagre, Aido-Buameh 2014).
Whistleblowing1 protection and
corruption The first step to overcome these challenges and
encourage reporting is to provide whistleblowers with
Whistleblowers are integral to anti-corruption efforts adequate protection from all forms of retaliation. This
as their disclosures may include information on will not only serve to protect these individuals, but also
corruption, fraud, mismanagement and wrongdoing to promote the fight against corruption more generally.
that threatens public health, safety, human rights, the The OECD (2012) notes that the detection of
environment and the rule of law (Transparency corruption or other abuses is more probable in
International 2013). environments with strong whistleblower protection.

When it comes to reporting wrongdoing at any given The necessity to protect whistleblower in both the
organisation, a distinction can be made between public and private sector has now been recognized by
whistleblowers and bell-ringers. Whistleblowers are all major anti-corruption policies (OECD 2012). For
members of the organisation itself who allege that the example, signatories of the United Nations Convention
organisation is involved in wrongdoing, whereas bell- against Corruption are obligated to establish
ringers are individuals external to the organisation who whistleblower protection legislation.
report perceived wrongdoing on the part of the
organisation (Brown et al. 2014). Transparency International's International Principles
for Whistleblower Legislation provide guidance on how
While bell-ringers’ disclosures should also be taken to formulate new and improve existing whistleblower
seriously, whistleblowers’ “insider perspective” means legislation:
they are particularly well placed to detect wrongdoing.
In fact, insider tips are often instrumental in the  Individuals must be protected from all forms of
detection of corporate fraud and corruption (Wolfe et retaliation, disadvantage, or discrimination at
al. 2014; Faunce et al. 2014). Since a higher risk of the workplace resulting from whistleblowing.
detection is considered more likely to prevent  The identity of the whistleblower may not be
corruption than the threat of severe sanctions (Howse disclosed without the individual's explicit
and Daniels 1995), a whistleblowing mechanism that consent.
increases the likelihood that any malfeasance is  An employer must clearly demonstrate that
quickly uncovered is expected to be an effective any measures taken against an employee
means to curb corruption and improve compliance. were in no sense motivated by a
whistleblower's disclosure.
A whistleblower may report misconduct through  An individual who makes a disclosure
internal reporting mechanisms, externally through an demonstrated to be knowingly false should be
independent body, or – in certain circumstances – to subject to employment sanctions and those
the public. However, whistleblowing does not come wrongly accused should be compensated.
without risks. In the workplace, whistleblowers may  Employees have the right to decline to
experience dismissal, suspension, demotion and participate in corrupt, illegal or fraudulent acts.
denial of promotion. Whistleblowers may also suffer  Whistleblowers whose lives or safety are in
personal threats such as being sued, arrested, jeopardy are entitled to receive personal
threatened, assaulted or, in extreme cases, killed protection measures (Transparency
(Transparency International. 2013). In addition, many International 2013).

1
Whistleblowing is the disclosure of information related to corrupt, threaten the public interest – to individuals or entities believed to
illegal, fraudulent or hazardous activities being committed in or by be able to effect action (Transparency Internation, 2013)
public or private sector organisations – which are of concern to or

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 WHISTLEBLOWER REWARD PROGRAMMES

compensation, there has been a relatively slow uptake

Among the G20 countries, the U.S., South Africa, of reward programmes worldwide (Faunce at al.
Australia, Canada, South Korea and the U.K. are 2014).
considered examples of good practice in regards to
whistleblower legislation (Wolfe et al. 2014). Albeit to The evidence on the effectiveness of whistleblower
different degrees, each state has established reward programmes is mixed. For instance,
dedicated laws and agencies to protect whistleblowers proponents of the programmes suggests that they
within public institutions and in some cases also increase the quantity of disclosures and cite its ability
private sector firms (Wolfe et al. 2014). to incentivise hesitant whistleblowers while opponents
to such schemes highlight the possibility of monetary
In addition to providing guarantees against retaliation, rewards undermining the morality of blowing the
some whistleblower protection laws have established whistle. The following sections will outline the primary
compensation schemes that provide remedies to arguments for and against reward programmes.
individuals for losses occurred as a result of their
disclosure. For instance, the UK's Public Interest Increasing the quantity of disclosures
Disclosure Act 1998 provides a reimbursement, which Whilst protection schemes may negate the severity of
is assessed on the losses suffered by a whistleblower personal risks caused by whistleblowing, some
from submitting a disclosure (Bowden 2005). The Act research contends that reward programmes are even
applies to workers within any sector and protects them
more effective at counter-balancing the possible
from retaliation by their employer, including dismissal,
dangers. Rewards go further than compensation for
disciplinary action or a transfer that otherwise would
damages and instead motivate whistleblowers through
not have happened (Bowden 2005). Whistleblowers
awards of funds. Research into the behaviour of
are awarded compensation if the health or safety of an
individual is, or is likely to be endangered, a managers and employees induced by the U.S. bounty
miscarriage of justice has occurred or the environment scheme, the Dodd-Frank Wall Street Reform and
is being damaged. The whistleblower is then entitled Consumer Protection Act of 2010 (Dodd-Frank Act),
to the settlement payment. has demonstrated that employees will perform a cost-
benefit analysis when considering whistleblowing
Benefits of introducing whistleblower (Franke, Moser and Simons 2016). In order for
reward programmes incentives to be effective, the rewards must be high
enough to compensate for retaliation charges (Franke,
Moser and Simons 2016). The study concluded that if
Beyond protection against retaliation and
rewards outweigh the anticipated costs of retaliation
compensation for losses, reward programmes provide
financial incentives for reporting wrongdoing. Such they would support an increase in disclosures (Franke,
schemes aim to counteract the disincentives caused Moser, and Simons, 2016). In the U.S., increased
by personal risks facing whistleblowers. Despite some monetary incentives have led to an 'unprecedented'
similarities, reward programmes are therefore number of investigations and greater recoveries
fundamentally different from compensation schemes (Kohn, 2014). Franke, Moser and Simons’ (2016)
by providing an award of funds rather than simply a model does, however, suggest that as rewards
compensation if losses have occurred. They either increase, so does the risk of false accusations. This is
come in the form of general bounty schemes or qui we return to below in the section on false reports.
tam laws. Bounty schemes are simple cash-for-
information programmes that award whistleblowers Public awareness
whose information leads to a successful prosecution Whistleblower rewards are often given media
with a fixed sum of money. Qui tam laws allow the coverage and may help to change wider attitudes on
whistleblower (known as the relator) to bring a lawsuit the act of blowing the whistle. According to research
on behalf of the government if fraud has been by UK-based law-firm RPC, the number of
committed. The relator is then eligible for a portion of whistleblowers working in financial and professional
the recovered funds if successful. While several services rose primarily as a result of greater public
countries such as the UK and Australia have strong awareness of the option of whistleblowing (Craggs
whistleblower protection legislation that entails

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 WHISTLEBLOWER REWARD PROGRAMMES

2015). Rewards may then have a two-fold effect on the through the introduction of whistleblower rewards. If
number of disclosures. Firstly, they garner public there are financial incentives for whistleblowing then
attention, which then leads to an increase in the those who have knowledge of cartel activities must be
number of whistleblowers coming forward. prevented from exposing misconduct through either
threats or bribes (Stephan 2014). This makes existing
Secondly, some claim that rewards work towards infringements less stable and encourages distrust
ending the stigmatisation of whistleblowers. One law between cartel members (Stephan 2014). The
firm that works with whistleblowers has praised the efficiency of the cartel is reduced, as trust decreases
U.S. bounty scheme, the Dodd-Frank Act, stating that and the costs of bribery increase in order to match the
it both incentivises people to speak up and helps to whistleblower reward (Stephan 2014). It should be
change the traditional stigmas of whistleblowing noted that this benefit would only occur if the
(Kasperkevic 2015). They argue that as the legislation allows co-conspirators to be considered
government takes greater control over whistleblower whistleblowers, which is often not the case. The cartel
protection and reward programmes, this leads to may also choose to reduce the number of people in
public awareness of the importance of reporting each firm that are directly involved in the cartel in order
wrongdoing and thus encourages more people to to diminish the risks caused by reward programmes.
come forward (Kasperkevic 2015).
Given the considerable risks involved in blowing the
Cost effectiveness whistle on cartels, Stephan (2014) argues that the
Reward programmes may lower public spending, as financial rewards should be considerably higher than
they are less costly than traditional investigative they currently are in countries such as the United
methods. Police officers and investigators consume Kingdom, Hungary or Pakistan, and suggests
real resources, whereas whistleblower rewards are somewhere in the range of 5 million USD.
simple wealth transfers (Givati 2016). Research into
the theory of whistleblower rewards has shown that - Despite the evidence presented above that reward
as long as the risk of a false report is low enough - programmes encourage whistleblowing, other studies
using a whistleblower and a reward programme is suggest that the introduction of rewards can lead to
more economical than relying upon police officers negative consequences which may outweigh the
(Givati 2016). Certain types of allegation are less likely benefits. When considering the introduction of reward
to be prone to false reporting than others; the risk of programmes into British legislation the Bank of
false reports is likely lower where the reported England concluded that there is no empirical evidence
wrongdoing concerns tax evasion or environmental of rewards leading to an increase in quantity or quality
damage, for instance, as the falsification of evidence of disclosures (Bank of England, 2014). Their
would be difficult (Givati 2016). conclusion was based on a visit to the United States
by UK Financial Conduct Authority representatives to
Internal compliance assess the most internationally well-known bounty
Reward programmes can help to strengthen internal programme, the Dodd-Frank Act. They concluded that
compliance within organisations. Paying the introduction of similar bounties within the UK would
whistleblowers could counteract negative social be unlikely to increase the number of successful
pressures that favour silence (Bradley 2015). This in prosecutions (Bank of England, 2014). While this
turn could contribute to the development of report has been widely cited, the methodology and
organisational norms that inculcate a more compliant, conclusions have been criticised, with the US National
transparent and accountable workplace culture. Whistleblower Center even formally requesting its
withdrawal.2
Cartel deterrence
One study of South Korea’s reward system found that
a cartel's anti-competitive behaviour is weakened

2
For a detailed explanation of the withdrawal request see: corruption-whistleblowers/national-whistleblower-center-requests-
https://www.whistleblowersblog.org/2018/06/articles/foreign- bank-of-england-withdraw-deleterious-whistleblower-report/

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 WHISTLEBLOWER REWARD PROGRAMMES

Disadvantages of providing incentives to accessing confidential files for evidence of illicit

whistleblowers behaviour.

False reports Assessment of reward programmes’

Reward programmes may have the undesirable effect effectiveness
of leading to false accusations of misconduct as
individuals may view the incentives as an opportunity There are still considerable risks facing whistleblowers
to pass on speculative rumours or fabricate evidence and, as such, the positive effects of whistleblowing
(Givati 2016). According to several studies (Givati must outweigh the negative effects (Franke et al.
2016; Franke et al. 2016), as rewards for 2016). Analysis concludes that as the personal cost of
whistleblowing increase so does the risk of false whistleblowing increases, a higher reward is required
reports. to induce reports and maintain deterrence (Givati
2016). Conversely, where rewards outmatch risks, the
Opportunistic reports quantity of disclosures will rise (Franke et al. 2016).
Opportunistic whistleblowers may encourage Similarly, a study on cartels finds that a strong
corporations into financial settlements in order to avoid monetary incentive will motivate people with
reputational damage and bypass the criminal court information on cartel behaviour to come forward as
system all together (Givati 2016). long as the rewards are sufficiently high (Stephan
2014).
A study of incentive-based compliance mechanisms
has suggested that as a reward's size is typically Other studies conclude that reward systems are
based upon the seriousness and severity of the effective at motivating whistleblowers to communicate
wrongdoing, whistleblowers may choose to delay their information about corporate malpractice in a timely
report until the last possible moment in order to and accurate way to public authorities (Howse and
maximise their monetary gain (Howse and Daniels Daniels 1995). Overall, the literature suggests that
1995). Moreover, in order to obtain a reward the while there may be some concerns about reward
whistleblower must provide sufficient evidence of schemes, these are not so serious as to prevent their
misconduct. Therefore, whistleblowers may wait until adoption (Stephan 2014; Howse and Daniels 1995).
they have assembled a substantial body of evidence
before blowing the whistle; these delays may result in
evidence being destroyed or rendered unavailable by An analysis by the University of Chicago Booth School
guilty parties (Howse and Daniels 1995). Ultimately, of Economics of the impact of the U.S. qui tam
however, Howse and Daniels (1995) argue that the scheme, the False Claims Act, looked at all reported
risks of delaying reporting act as a curb on fraud cases in the country between 1996 and 2004.
whistleblower opportunism. The breakdown concluded that monetary incentives
did indeed motivate people to blow the whistle and
Entrapment increase the number of disclosures (Kohn 2014). The
As the reward is often determined by the percentage study found no evidence to support the view that
of the total penalties assessed against the corporation, monetary incentives lead to negative effects such as
a whistleblower has an incentive to encourage other false reports (Kohn 2014). It argues that the failure of
employees to commit as much illicit activity as nations to enact whistleblower reward laws has
possible (Howse and Daniels 1995). resulted in foreign nationals seeking protection under
In a survey on whistleblowing, respondents who were the U.S. whistleblower reward programme (Kohn
most concerned about reward programmes reasoned 2014).
that they could lead to inappropriate reports being
lodged (Tracey and Groves 2013). Howse and Daniels
(1995) also argue that rewards may also harm a
business's performance by causing distrust amongst
employees, as staff may fear their colleagues are

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 WHISTLEBLOWER REWARD PROGRAMMES

2. MAIN FEATURES OF REWARD In contrast, the whistleblower in a qui tam case may
PROGRAMMES hire an attorney once they have gathered evidence
and place the qui tam action under seal (Faunce et al.
2014). Once under seal, a government body will then
Scope oversee the evidence and assess the
whistleblower/relator (Faunce et al. 2014). At this
Reward programmes in the form of bounty schemes point, the government may choose whether or not to
may apply to whistleblowers in either public or private intervene and join the case (Faunce et al. 2014). If the
sector organisations and their objective is to government does not intervene, it allows greater
encourage the detection of a wide range of involvement of the whistleblower throughout the
inappropriate and illicit behaviour. Bounty schemes proceedings.
target individuals or groups of individuals who have
insider knowledge of any past, present, or likely to
Requirements
occur illegality, economic crime, miscarriage of justice,
waste or misappropriation by an organisation,
The prerequisites for rewards vary from jurisdiction to
degradation of the environment, or the endangerment
jurisdiction. Some may insist that in order to be
of the health or safety of an individual or community
rewarded the whistleblower must first report the
(Faunce et al. 2014).
wrongdoing through internal mechanisms and, if those
fail, report externally. Others, such as for example the
In the case of qui tam laws, such as the U.S. False
Ontario Securities Commission, do not require any
Claims Act for example, a lawsuit can be filed by any
internal reporting in order to bestow a reward.
individual who has knowledge of fraud against the
government. He/she thus initiates a suit on behalf of
Gaining information independently is also a common
the government and, if successful, receives a financial
requirement of reward programmes and the
reward (Faunce et al. 2014). Qui tam laws are usually
whistleblower must have come forward with this
filed by people who are not affiliated with the
evidence voluntarily. The originality of information is
government (such as contractors) and typically involve
also often a requirement for eligibility.
industries such as healthcare and defence.

The outcome of the case is another major factor in the

However, there are a number of cases whereby an
requirements. Many jurisdictions have a minimum
individual is unable to claim a reward. In the case of
amount of recovered funds needed in order to award
the U.S. Dodd-Frank Act, rewards are not to be paid
the whistleblower, such as the Dodd-Frank Act, in
to whistleblowers who work for regulatory agencies,
which the recovered funds must be over
the Department of Justice, a self-regulatory
US$1,000,000 in order to render the whistleblower
organisation, the Public Company Accounting
eligible for a reward (SEC 2011). The high number of
Oversight Board, a law enforcement organisation or
requirements have also led to criticism of reward
those who are convicted of a criminal violation related
programmes, arguing that it leads to very few
to the securities law in question (Bradley 2015).
whistleblowers actually receiving rewards (Bank of
England 2014).
Process
Whilst many describe qui tam laws and bounty
schemes as the same, the crucial difference lies with
Size of the reward
the role of the whistleblower in bringing action
(Vaughn, 2012). The amount of award differs between countries but is
In a simple cash-for-information bounty scheme, a usually predetermined before the case comes to court
whistleblower may submit evidence to the relevant by the relevant government body or court. For
authority. If the evidence proves that misconduct has example, under the False Claims Act, if the evidence
been committed, the individual must then rely upon the leads to successful prosecution and the Department of
designated body to file charges and collect funds. The Justice (DOJ) has chosen to intervene then the relator
selected reward is then transferred to the is eligible for 15%-25% of the damages that the
whistleblower. government recovers (Faunce et al. 2014). However,

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 WHISTLEBLOWER REWARD PROGRAMMES

if the DOJ does not intervene, then the relator may be institutions, which does not allow effective
awarded with between 25% and 30% of recovered confidentiality of the identity of the whistleblower
funds (Faunce et al. 2014). Under the bounty (Faunce et al. 2014). However, many programmes do
schemes, the whistleblower may be awarded between combine rewards with added retaliation protections
10% and 30% of funds recovered (SEC 2011). such as having the option to provide evidence through
intermediaries such as lawyers, therefore maintaining
Most reward programmes have designated confidentiality.
percentages of the recovered funds to award to the
whistleblower, or, they may take the rewards from a Further recommendations
dedication fund composed of voluntary donations and
previously recovered funds (Faunce et al. 2014). The
Recognition of whistleblowing as an act of civic
size of the reward may often depend upon the severity
courage
of the crime, the quality of evidence provided by the
whistleblower and the level of involvement from the
As shame is an effective sanction, social recognition
whistleblower.
can serve as another form of incentive (Vaughn 2012).
This can be achieved through formal awards given by
There is a debate about the size of monetary rewards.
agencies, businesses, professional groups and peers
Some research proposes that bounties should be low,
(Vaughn 2012). Such recognition supports the
ranging from 1% to 3% of the penalty recovered
whistleblower and aids emotional recovery whilst
(Currell and Ferziger 2000). This is because it may
restoring their reputation and standing (Vaughn 2012).
increase tips from whistleblowers for whom internal
A number of whistleblower advocacy groups provide
moralistic motivation alone will not induce action, but
awards and recognition to whistleblowers, for
will also mitigate the risk of false reports that are driven
example:
by large sums of reward money (Currell and Ferziger
The Sam Adams Award
2000). However, other studies calculate that a
The Paul H. Douglas Award for Ethics in Government
whistleblower in the U.S., for example, who earned
The Ridenhour Prizes
US$80,000 a year would need a much higher reward
of US$4,000,000-5,000,000 to cover the prospective
loss of income, loss of promotions, legal defences, Transparency
and the risk of social, family and personal pressures In the U.S., annual reports on whistleblowing
(Stephan 2014). disclosures and their handling and outcome
arepublished on the Securities and Exchange
Commission’s (SEC) website. Greater transparency in
Potential issues
the processes and results of whistleblower reports
could boost the confidence of prospective
Whistleblower reward programmes often involve whistleblowers who feel they are unable to report
lengthy and complex regulations to balance the internally (Bank of England 2014). Studies
potential disadvantages of offering financial demonstrate that online access to information on
incentives, as is the case with the Dodd-Frank Act whistleblower cases results in an increase in
(Bradley 2015). This means that potential prosecutions of corruption (Goel and Nelson 2013).
whistleblowers may struggle to navigate the system This research suggests that heightened public
without external support. Whistleblowers are likely to awareness about whistleblowing is in fact more
require lawyers, which is both costly and poses the effective than the quantity and quality of
question of whether the industry of representing whistleblowing laws themselves (Goel and Nelson
whistleblowers should be regulated (Bradley 2015). 2013).

Anonymity is another concern in regards to reward Cultural change

programmes. Many schemes do not allow
Other studies on the psychology of whistleblowers
whistleblowers to remain anonymous. For example,
have suggested recommendations for increasing the
The Ghanaian Whistleblower Act 2006 only rewards
number of disclosures within organisations. They
whistleblowers once they have reported to a chief or
propose that whistleblowing represents a trade-off
elder in addition to a range of government offices and

7
 WHISTLEBLOWER REWARD PROGRAMMES

between two moral values - fairness and loyalty - and report through internal mechanisms,3 and will still be
that when fairness increases in value, then eligible for reward if they report the same information
whistleblowing is more common and, likewise, when to the SEC within 120 days.
loyalty is more valued, whistleblowing is less likely
(Dungan, Waytz and Young 2015). In light of these Another option is for a whistleblower to file a claim
conclusions, it is suggested that in order to motivate a under the False Claims Act (FCA) through a qui tam
larger number of whistleblowers, organisations must lawsuit if fraud against a government programme is
build a community which values constructive dissent alleged (Bank of England, 2014). The U.S. Supreme
as well as loyalty. This would result in those with Court stated that 'the FCA was intended to reach all
dissenting opinions being rewarded and viewed as types of fraud, without any qualification, that might
effective leaders (Dungan, Waytz and Young 2015). result in financial loss to the Government' (Faunce et
al. 2014). An individual, called a relator (an
Similarly, a study of the implementation of organisational member) or bell-ringer (an extra-
whistleblower policies in the workplace concluded that organisational member) may file a false claims
the most efficient means of increasing whistleblowing complaint. This is initially completed through a no-win
is to change an organisation's culture through no-fee attorney and the qui tam action is filed under
institutionalising 'an ethical way of doing things' seal in camera whilst the Department of Justice
(Senekal and Uys 2013). Changes in internal cultural monitors the case, assesses the relator and prevents
attitudes towards whistleblowing are just as important false claims (Faunce et al. 2014). The government
as external legislation. Indeed, where the may then decide whether to intervene or join the case
organisational norm is to report wrongdoing rather (Faunce et al. 2014). The FCA has been applied to a
than look the other way, a low-corruption equilibrium number of different cases including: data suppression,
is to be expected, in which corrupt players find few international bribery, scientific misconduct, and bias in
accomplices and face higher risks of detection and drug trials in sectors such as medical, financial, and
sanction (Fisman and Golden 2017: 7). defence contracting (Faunce et al. 2014). If
successfully prosecuted, the informant is eligible for
3. COUNTRY EXAMPLES 15% to 25% of recovered funds if the Department of
Justice intervenes and between 20-30% if the
U.S. government does not (Faunce et al. 2014).

Limitations
Main features of the scheme
The effectiveness of the use of financial incentives by
The U.S. has long relied upon private citizens as a
U.S. regulators is contested. Opponents of the Dodd-
means of law enforcement and employs the most
Frank Act argue that the quality and/or quantity of
widely known whistleblower reward programme
disclosures has not increased since the introduction of
(Bradley 2015). As mentioned above, incentives are
rewards and that they require a complex and costly
facilitated through the Dodd-Frank Act of 2010.
governance structure (Bank of England 2014). Others
Section 922 of the act states that the U.S. SEC will pay
have concluded that it creates moral hazards such as
whistleblowers who voluntarily provide original
malicious reporting, conflict of interest in court and
information that leads to the recovery of funds over $1
entrapment (Adesiyan, Wright and Everitt 2014).
million (SEC 2011). These individuals are reliant upon
the SEC to file charges and collect fines in order to
receive any reward (Faunce et al. 2014). Indication of effectiveness
Whistleblowers are awarded between 10% and 30% In 2014, it was announced that four whistleblowers
of the total funds recovered and employers are collected more than $170 million from bringing a FCA
prohibited from retaliating against whistleblowers lawsuit against the Bank of America for mortgage
(SEC 2011). Whistleblowers have the option to first fraud (Givati 2016). It was also recorded that the total
amount of money recovered through the FCA had

3
Whistleblowers are not obliged to exhaust internal channels
before reporting to the SEC’s external whistleblowing mechanism
(Feanke et al. 2014).

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 WHISTLEBLOWER REWARD PROGRAMMES

exceeded $18 billion between 2010 and 2014 (Givati that are encouraged are illegal insider trading or
2016). As such, Faunce et al. (2014) argue that the tipping, fraud, corporate financial statements and
FCA has been proven to be a successful anti-fraud unregistered trading. Information must be original and
measure that should be emulated by other countries. obtained through independent knowledge or
Its supporters also point out that it reduces independent analysis. If a whistleblower’s evidence
government prosecution costs by shortening results in a final order imposing monetary sanctions
investigation times (Faunce et al. 2014). then he/she is awarded with cash rewards between
5% to 15% of the recovered funds, capped at
The SEC does not only accept tips from U.S. citizens CAN$5,000,000 (Neal 2016).
regarding fraud, corruption and misconduct. The
Dodd-Frank Act has transnational application and can Limitations
be applied to violations of the Foreign Corrupt The Office of the Whistleblower's rewards are limited
Practices Act (FCPA) (Kohn 2014). Section 922 of the to financial fraud. They do not cover wider corrupt
Dodd-Frank Act states that individuals can assist the practices and there is currently no mechanism in place
SEC in uncovering securities violations including to collect a reward from such disclosures.
FCPA violations (Kohn 2014). The FCPA is an anti- Whistleblowers are also not required to report
bribery law that prohibits illicit payments to foreign internally in order to be eligible for a reward. This could
officials and requires companies whose securities are lead to whistleblowers being more likely to report
listed in the U.S. to meet its accounting provisions. In externally. While this could be seen as an advantage
2014, the SEC reported to Congress that they had for the whistleblower, it could also be seen as having
received tips and awarded applications from countries a negative impact on internal reporting. Unlike the
ranging from the UK, Brazil, South Africa and India SEC's programme, there is no leniency for the
(Kohn 2014). In 2018, the US National Whistleblower culpable whistleblower's role in the crime and those
Center released a report analysing FCPA cases since who report run the risk of opening themselves up to
1977, claiming that prosecutions have been liability (Neal 2016). The OSC does not offer
increasing, in part thanks to tip-offs from anonymity; although a whistleblower may initially hire
whistleblowers. The report also claims strong a lawyer to maintain confidentiality, this cannot be
monetary incentives motivate people to come forward guaranteed at later stages (Neal 2016).
(National Whistleblower Center, 2018). For more
information on the intersection of the Dodd-Frank Act Indication of effectiveness
and the FCPA see Berg and Adrophy (2012).
Ontario is the first Canadian jurisdiction to offer
financial incentives. Kelly Gorman, the first chief of the
Canada OSC's Office of the Whistleblower, stated that the
incentive programme has assisted the alteration of the
Main features of the scheme cultural stigma attached to whistleblowing and
In 2011, the Ontario Securities Commission (OSC) compensated those for personal and professional
announced that it was implementing a programme of risks (Hassleback 2016).
financial rewards for those who voluntarily provide
information about corporate misconduct and South Korea
misleading financial disclosures through its Office of
the Whistleblower (Faunce et al. 2014). This Main features of the scheme
legislation is largely based upon the bounty scheme of The Protection of Public Interest Whistleblowers Act
the US Dodd-Frank Act and the whistleblower was passed in 2011 and offers protection and financial
protection laws in Australia and the UK (Hassleback rewards for government and corporate whistleblowers
2016). who report violations relating to safety, health, the
environment, consumer protection and fair
The Office of the Whistleblower's guide states that an competition (Wolfe et al. 2014). Wrongdoing can be
entitled whistleblower may be an individual or group of reported to the Anti-Corruption and Civil Rights
individuals who are aware or suspect a violation of Commission (ACRC), which then, if disclosures are
Ontario securities law and voluntarily report that accepted, sends them to relevant agencies for
information online or by mail. The types of misconduct

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 WHISTLEBLOWER REWARD PROGRAMMES

investigation (Wolfe et al. 2014). The ACRC offers 2014). The cases have varied from evidence of cartel
whistleblowers from 4% to 20% of recovered funds of existence and bid rigging scandals (Stephan 2014).
up to US$2,000,000 and provides protections Proponents of reward programmes often cite South
including safeguarding against the cancelation of Korea as evidence that incentives result in increased
permits, licenses and contracts (Wolfe et al. 2014). cartel reporting (Stephan 2014).

For cartel offences, the Korean Fair Trade Ghana

Commission (KFTC) empowered its competition laws
under the Monopoly Regulation and Fair Trade Act, Main features of the scheme
which were enacted as part of the government's efforts
The Ghanaian Whistleblower Act 2006 was the first
to liberalise markets, abolish direct price controls and
African legislation to introduce a bounty programme
weaken cartel activity (Stephan 2014). The KFTC
(Faunce et al. 2014). A whistleblower may report any
introduced a formal rewards mechanism for
‘impropriety’, which includes any past or near future
informants in cartel cases in 2002, and, in 2004 set out
illegality, economic crime, miscarriage of justice, or
where rewards would be offered and excluded such as
misappropriation by a public institution. This
in situations where evidence is insufficient (Andreas
information must then be reported to a chief or elder,
2014). The size of rewards is determined by a
a religious body or a range of government offices
committee whose role it is to ensure fairness and
(Faunce et al. 2014). The disclosure may be made in
transparency and informant protection is guaranteed
writing or orally and, if leading to an arrest and
by enforcement decree.
conviction of an accused person, then a reward shall
be given to the whistleblower (Parliament of the
Limitations Republic of Ghana 2006). The amount determined by
The first few years of the anti-trust programme under the Whistleblower Act is either 10% of the money
the KFTC were considered unsuccessful as fewer recovered or an amount that the Attorney General in
than ten reports were generated in a four-year period consultation with the Inspection-General of Police
(Sullivan, Ball and Kiebolt 2011). This was attributed determines (Parliament of the Republic of Ghana
to the negative perception of informants in the country 2006). The financial rewards are generated through a
as well as low cash rewards. dedicated fund that is comprised of voluntary
contributions allocated by Parliament, including
Indication of effectiveness amounts recovered from fraud (Faunce et al. 2014).
The Protection of Public Interest Whistleblowers Act is
considered one of the world's most comprehensive The Whistleblower Act also gives whistleblowers the
whistleblower laws (Wolfe et al. 2014). From 2002 to right to sue for victimisation within the High Court
2013, the ACRC received 28,246 reports of (Faunce et al. 2014). The whistleblower is liable to
wrongdoing and recovered the equivalent of apply for police protection if there is a reasonable
US$60,300,000 which resulted in US$6,200,000 of cause to believe that the whistleblower's life or
rewards (Wolfe et al. 2014). As of May 2014, the property, or that of his/her family, is endangered
largest reward paid was US$400,000 from a case in (Parliament of the Republic of Ghana 2006).
which a construction company was paid Protection covers risks of dismissal, suspension,
US$5,400,000 for sewage pipelines that were not built redundancy, denial of promotion, harassment or
and resulted in eleven people facing imprisonment, threats because of the disclosure (Parliament of the
with all funds recovered (Wolfe et al. 2014). Republic of Ghana 2006).

After an initially poor reception, the KFTC in 2005 Limitations

increased the reward amount up to 100 million Won Research suggests that whilst the enactment of
(US$94,000) and guaranteed confidentiality for whistleblower legislation has been a commendable
whistleblowers (Stephan 2014). As a result, the effort there has been little political will in implementing
country now has one of the most active cartel and complying with the law (Domfe and Bawole.
enforcement regimes in the world: in 2008 alone, the 2011). There have been recent cases where, despite
KFTC imposed 205 billion Won (US$192,000,000) in the strong legal protection, whistleblowers still suffer
administrative fines within 43 cartel cases (Stephan from retaliation. For example, when the Chief

10
 WHISTLEBLOWER REWARD PROGRAMMES

Accountant and the Chief Director of the Ministry of Pakistan

Youth and Sports revealed misappropriation of public
funds in 2008, they were asked to leave their positions Main features of the scheme
with one being surcharged with an amount of $20,000
The Competition Commission of Pakistan (CCP)
for lack of discretion in approving payment for the
introduced a rewards programme to uncover cartel
Minister (Domfe and Bawole. 2011). The Attorney-
activity through its Guidelines on the Reward Payment
General justified the action taken against the
to Informants Scheme. The scheme combines
whistleblowers and further stated that the Principal
financial rewards with added protections, such as
Accountant did not qualify as a whistleblower as he did
anonymity (Faunce et al. 2014). Payments range from
not submit anonymously (Domfe and Bawole. 2011).
Rs 200,000 to 500,000 (USD $1,900 to $4,700) and
are calculated through the usefulness of information,
Hungary the level of the informant's contribution, the severity of
the cartel misconduct and the efforts made by the
Main features of the scheme informant (CCP). Whistleblowers in Pakistan are also
Hungary has adopted a whistleblower reward scheme offered protection under the scheme; anonymity is an
within the antitrust context. An amendment of the option and specially trained officers dealing with the
Hungarian Competition Act in 2010 under Article 79/A case safeguard the informant's identity (CCP).
(1) and (3) states that informants who provide
'indispensable' information about hardcore cartels The Federal Board of Revenue offers a similar
may be entitled to a reward from the Hungarian mechanism for the public to report evasion in sales
Competition Authority (Hungarian Competition tax, income tax or corrupt practices of Inland Revenue
Authority 1996). A hardcore cartel refers to officials (Government of Pakistan 2016). Whoever
competitors that fix purchase or selling prices, divide reports the concealment of tax evasion, corruption, or
the share of markets, rig bids or fix production quotas fraud and the information results in collected tax is
(Hungarian Competition Authority, 1996). eligible for a reward. For Rs 500,000 (approximately
'Indispensable' information also includes information US$4,769) or less of tax evaded, the whistleblower
that leads the court to issue a warrant to conduct an may receive 20% of the tax and for over Rs 1,000,000
unannounced inspection and leads to the obtainment (approximately $US9,538), the whistleblower may
of evidence (Hungarian Competition Authority, 1996). receive up to 5% of recovered funds (Government of
Pakistan 2016).
Rewards are only offered to whistleblowers who
provide timely evidence about hardcore cartel activity Limitations
and are limited to 1% of the fine imposed by the These bounty schemes are limited to cartel activity
Competition Council, with a maximum of HUF and fraud. There is no reward scheme for corrupt
50,000,000 (approximately US$180,000) (Hungarian practices in general. Analysis also suggests that the
Competition Authority 1996). No reward is offered to amount of bounty provided in Pakistan for cartel
the informant if the evidence has been obtained as a whistleblowers is not large enough to incentivise the
result of a crime or an offence (Hungarian Competition majority of informants (Stephan 2014).
Authority 1996).
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Topham, Gwyn. 2015. UK Tax Authorities Pay

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