Financial Incentives for Whistleblowers: A Short Survey

Spagnolo, Giancarlo; Nyreröd, Theo

doi:10.1017/9781108759458.024

Cited by 2 publications

(2 citation statements)

References 19 publications

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“…To enhance second-order compliance, others have called for whistleblower rewards to those who report non-compliance by covered institutions (Spagnolo and Nyreröd, 2021a, Scarcella, 2021), and the USA recently passed the Anti-Money Laundering Act of 2020 (AMLA), which provides for awards to whistleblowers who bring forward information about violations of the Bank Secrecy Act (BSA) that covers SARs and obligations on financial institutions. Nevertheless, these recent policy responses that squarely put the problem on first and second-order non-compliance may be obscuring more fundamental issues with the global AML regime.…”

Section: Global Anti-money Laundering Preventative Regimementioning

confidence: 99%

“…Rewards have been available in the US AML context under the Bank Secrecy Act, but, in contrast to the above-mentioned US programmes, these rewards were handed out entirely at the treasury’s discretion and were capped at $150,000. There is little evidence that discretionary rewards in this lower range are effective at eliciting information (Spagnolo and Nyreröd, 2021b), particularly quality information from high-level employees. Perhaps because of this, AMLA 2021 replaced the $150,000 reward with a reward of up to 30% of the fines paid for BSA violations, bringing it more in line with the SEC and IRS programmes.…”

Section: Background On Reward Programmesmentioning

confidence: 99%

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Money laundering and sanctions enforcement: large rewards, leniency and witness protection for whistleblowers

Nyreröd

Andreadakis²,

Spagnolo³

2022

JMLC

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Purpose With sanctions becoming an increasingly important tool in ostracising autocratic regimes from western markets, the need for effective enforcement of sanctions and anti-money laundering (AML) is increasing, and the global AML regime will be the backbone to detecting evasion of sanctions. This regime, however, has been widely criticised as ineffective. This paper aims to discuss issues with the current sanctions/AML regime and propose a reward scheme for whistleblowers to enable asset seizures that is not reliant on its effectiveness. Design/methodology/approach This paper reviews weaknesses in the global AML regime, provide suggestions on how to design whistleblower reward programmes, based on agency experience and empirical evidence, as well as elaborate on how to use such programmes in the AML context. Findings This study concludes that for reward programmes to be effective in the context of AML and sanctions enforcement, they need to include witness protection and leniency for money launderers, though not for those convicted of a criminal offence associated with the predicate crime. Moreover, rewards should be mandatory and scale with the amount of money seized or confiscated, and the cap on monetary rewards should be higher than it is under the Kleptocracy Asset Recovery Rewards Programme in the USA. Originality/value In contrast to how the USA went about implementing rewards in this area under the Kleptocracy Asset Recovery Rewards Programme, this study argues that these programmes should be designed differently. This study also provides novel advice to governments on different design dimensions in the AML context and a model with three crucial pillars along with other design dimensions that should be considered.

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Section: Global Anti-money Laundering Preventative Regimementioning

confidence: 99%

Section: Background On Reward Programmesmentioning

confidence: 99%

Money laundering and sanctions enforcement: large rewards, leniency and witness protection for whistleblowers

Nyreröd

Andreadakis²,

Spagnolo³

2022

JMLC

Self Cite

View full text Add to dashboard Cite

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A fresh look at whistleblower rewards

Nyreröd

Spagnolo

2021

JGR

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Research on whistleblowing has increased significantly in the last decades, and so has the number of laws governing whistleblowing. Whereas the EU recently enacted a Directive (Directive 2019/1937) protecting whistleblowers, the US has gone one step further long ago, not only protecting them but also offering substantial monetary rewards for their information. More countries are now adopting reward programs, while numerous recent instances of corporate wrongdoing suggest that the central promise of these programs: increasing detection and deterrence of wrongdoing, is highly needed not only in the US. These developments warrant a review on the optimal design of these programs, based on experience and available evidence, to obtain optimal deterrence and avoid policy mistakes. In this paper, we review the evidence for the effectiveness of the US whistleblower reward programs and consider some recent novelties. We also consider objections against these programs and local factors in the US that likely contribute to their success. Finally, we voice some concerns over the EU Directive’s ability to achieve its policy objective of enhancing enforcement of Union law. We find that the evidence for the effectiveness of reward programs is significant, and that common concerns about these programs have not materialized. Whereas much of the prior literature has focused on their viability and effectiveness, further research would do well in focusing on how to effectively design these programs, what has driven their success, and what local national characteristics could hamper their effectiveness outside the US.

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Financial Incentives for Whistleblowers: A Short Survey

Cited by 2 publications

References 19 publications

Money laundering and sanctions enforcement: large rewards, leniency and witness protection for whistleblowers

Money laundering and sanctions enforcement: large rewards, leniency and witness protection for whistleblowers

A fresh look at whistleblower rewards

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