The Law Firm of Piacentile, Stefanowski & Malherbe LLP

Various Ways to Improve Whistleblowing

Whistleblowers have played a major leadership role in the fight against corruption, fraud, and wrongdoing in the United States and around the world. It is therefore important to continuously strengthen whistleblower programs. These laws support and protect those who come forward and blow the whistle. In a recent poll carried out by Whistleblower Network News, it was found that an overwhelming majority of the American public believes Congress should prioritize stronger whistleblower protections for those who report government or corporate fraud. Respondents said that this should be an immediate priority for Congress. In this article, we will offer some recommendations about how best to strengthen US whistleblowers programs to more effectively fight corruption.

First, an International Whistleblower Office (“IWO”) should be created. The strength of whistleblower laws varies substantially from country to country. Many countries only offer very weak protections, while most do not even have any whistleblowers laws at all. The US has been the worldwide leader in strong whistleblower protection laws. Since the enactment of the first transnational whistleblower programs, thousands of individuals outside of the US scattered throughout about 123 countries, have actively used U.S. laws to report corruption, economic crimes, and all kinds of actionable wrongdoing. An IWO could help with the need to obtain witnesses to fight corruption, money laundering, tax evasion, environmental crimes, and many other wrongdoings committed by transnational criminal organizations.

Second, The Anti-Money Laundering Act (AML) needs to conform to the Dodd-Frank Act’s (DFA) highly effective whistleblower rewards provisions. The AML became law on January 1, 2021, as part of the massive National Defense Authorization Act. Included in this law are provisions establishing a whistleblower rewards program for individuals who report money laundering violations to U.S. Authorities and where a subsequent enforcement action leads to a collection of monies for the US government. The AML was partly modeled off the highly successful DFA, which established the SEC and CFTC whistleblower programs. However, the AML Act drifted away from the DFA in many ways, weakening its current attractiveness to would-be whistleblowers.

Some of the problems that undermined the potential of the AML Act were, for example, the lack of a mandatory minimum award, the lack of clarity about how the Treasury Department would pay these rewards, and the exclusion of all employees at FDIC-insured financial institutions and credit unions from coverage under the law’s anti-retaliation provisions. To help improve the success of this AML program, Congress or the Treasury Department via regulation needs to take action and create strict deadlines for making rewards decisions and permit an internal administrative appeal if a reward is denied. There is also a need to have an anti-money laundering user-friendly whistleblower office and website, and a concrete plan to ensure interagency cooperation.

Third, proper funding and administrative support for the IRS whistleblower program must be provided in order to apply the tax code against wealthy and corporate tax cheats. Since the creation of the IRS whistleblower program in 2006, the IRS has not been effectively capitalizing on the information whistleblowers have provided. There is currently a tax collection gap estimated at somewhere around $1 trillion per year. This is the difference between the amount of all taxes owed versus the amount actually collected. Many attribute this problem to the program being significantly underfunded. The IRS's funding from 2010 through 2018 was cut by 20% percent, resulting in the termination of 22% percent of its staff. According to a recent report by the Treasury Inspector General for Tax Administration, due to a lack of resources, the IRS failed to audit more than 897,000 wealthy individuals who skipped out on filing tax returns over a three-year period, owing an estimated $46 billion in taxes. Many studies show that increasing funding for IRS enforcement would increase tax collection by much more than the cost of funding. Many have argued that increasing the budget over the next 10 years by $100 billion would raise revenues by as much as $1.15 trillion over that period.

Finally, promoting National Whistleblower Appreciation Day could have an important practical and symbolic impact on US citizens. Celebrating all the many brave whistleblowers who have come forward and who have in turn often exposed themselves to numerous retributions, at great risk to their careers, can be inspiring to many, most especially to potential whistleblowers who have a deep moral need to tell the world about the wrong they know about but who need to know that America, its government/people, want you to come forward to shed light on darkness.