Although the whistleblower programs in the United States gets a lot of attention, the U.S. isn’t the only country to have a program to pay informants about corporate misconduct.
Earlier this year, Canada followed the lead of the United States and started offering rewards for tax whistleblowers. The Canada Revenue Agency will pay for tips about international tax noncompliance through its Offshore Tax Informant Program. The program allows for an award of between 5 and 15 percent when more than $100,000 in federal taxes are collected.
The initial process for providing information to Canada is a bit different than here in the United States. Submitting information to Canada starts with an initial call to their hotline to discuss the information the caller can provide. If the information is of the type that they are interested in, they provide the caller with a case number to include on the cover letter of their written submission.
International Antitrust Awards: Four countries pay for information when the United States doesn’t!
In our research, we discovered that Canada isn’t even the first country outside of the United States to pay for tips. Several members of the international community have adopted rewards programs in an area where the United States does not have one: antitrust. South Korea, United Kingdom, Hungary and Pakistan all pay informants for information about cartels engaged in price fixing. Strangely, this is an area where the United States does not pay. The United States investigated the wisdom of creating a program to pay for information about cartels, but there was substantial internal skepticism. Government employees were concerned that the prosecution could not meet the high burden of proof in a criminal case if the defendant could accuse the informant of bias because of the potential reward.
Australia May Be Next to Pay: Australian Senate Committee Recommends Corporate Regulator Explore Incentives.
The Economics References Committee (“Committee”) of the Australian Senate recently released a report on the Performance of the Australian Securities and Investments Commission (ASIC), their version of the Securities and Exchange Commission (SEC). In the report, the Committee recommended exploration of incentive-based compensation for whistleblowers either by allowing qui tam lawsuits or establishing a reward program similar to the SEC.
Because of the growth of the financial sector in Australia, the Committee examined the performance of their financial regulator. Two case studies it relied upon left it with the firm impression that ASIC had limited resources and power. These limitations may have played a role in allowing misconduct to happen at Commonwealth Financial Planning Limited (CFPL) between 2006 and 2010. The Committee also concluded that ASIC was too slow to act on information provided by whistleblowers about fraud happening at CFPL. The report spends nearly 100 pages of the roughly 500 page report on ASIC’s investigation and enforcement action against CFPL.
Among the suggestions it explored to improve the office was its handling of whistleblowers. Australian law offers protection to certain private sector employees who reveal information about violations of the Corporations Act to the Australian Securities and Investments Commission. But news stories broke in 2013 about the inability of ASIC to protect whistleblowers and consumers after issues were discovered at Commonwealth Bank.
The time may be ripe for Australia to implement this. According to the research cited in the report, the public there overwhelmingly supports whistleblowers. The country is also fresh off the implementation of its Public Interest Disclosure Act (PIDA), adopted last July to protect public sector employees reporting suspected legal violations. The law went into effect earlier this year, setting procedures and protections for government employees to internally and externally disclose waste, fraud and safety issues.
Two of the concerns about the PIDA was that it didn’t cover private sector employees and didn’t provide incentives for whistleblowers to come forward. It now looks like Australia will begin the process of correcting those deficiencies.
United Kingdom Passes on Rewards For Now
Last month, the United Kingdom released its response to the Whistleblowing Framework Call For Evidence and said that it did not believe financial incentives were needed. The effect of this decision is somewhat limited. Both the Financial Conduct Authority and the Prudential Regulation Authority are still considering whether they should implement an incentive program.