Canadian whistleblowers lead the world in reporting financial crime

Every year, dozens of honest, enterprising Canadians blow the whistle on alleged financial crimes, hoping to clean up the industry-- and strike it rich.

In the aftermath of the financial crisis, the U.S. Securities and Exchange Commission (SEC) established the Office of the Whistleblower in 2011. The program provides for compensating whistleblowers who come forward with evidence of financial misconduct.

Whether companies commit minor disclosure violations or engage in wholesale fraud, if the U.S. government eventually brings a case and imposes a sanction of more than $1 million dollars, between ten and 30 percent is awarded to the whistleblower.

Two new incentives have contributed to the program’s radical success: there is no upper limit on payouts and no restrictions on who can come forward. In 2014, the agency paid out its largest award to date: $30 million to a tipster in an undisclosed foreign country.

According to newly released data, about 4,000 tips a year are submitted to the SEC, which are then investigated by the Office of the Whistleblower’s small team of lawyers. Because any whistleblower whose information helps materially advance a case is eligible, the SEC has also received thousands of tips from abroad.

Every year, tipsters from Canada and the U.K. make up about a quarter of all foreign-based tips. As this number has grown, so has the number of tips from Canada. In 2017, the SEC received a record 73 tips from Canada.

Despite receiving a majority of their leads from America’s banking centers, like New York, New Jersey, and California, the SEC has disproportionately awarded foreigners. Nine of the 46 payouts to date have been to foreign nationals.

“International whistleblowers can add a great deal to our investigations,” said Andrew Ceresney, director of the SEC Enforcement Division, in 2016. “Our largest whistleblower award to date-- $30 million-- went to a foreign whistleblower who provided us with key original information about an ongoing fraud that would have been very difficult to detect.”

The whistleblowing program has been one of the few provisions of the Dodd-Frank financial reform that has not come under assault from the Trump administration. In a 149-page report, Treasury Secretary and former Goldman Sachs executive Steven Mnuchin called for rolling back an array of restrictions placed on banks after the financial crisis. This week, a senior civil servant at the Consumer Financial Protection Bureau filed suit against President Trump for appointing a director that is openly hostile to the agency’s mission.

In fact, the program has been so successful, other governments have been quick to adopt it. Jane Norberg, former deputy director of the SEC Whistleblower’s Office, pointed out that whistleblowers can easily be retaliated against and called on governments to adopt a formal processes to protect and reward reporters. It’s been a “game changer,” she said at a 2015 securities conference in Toronto. “Any country considering financial incentives should take a look at our annual report and see how many of their citizens are giving tips to us.”

In July 2016, the Ontario Securities Commission (OSC) launched their own whistleblower program, the first in Canada, with awards capped at $5 million dollars. As of September 2017, they have not disbursed any awards to whistleblowers, though their annual report claims that the office has “received several credible tips and high-quality information” in its first year.

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