Because corruption is usually conducted in secret, without readily identifiable victims, effectively tackling corruption often requires evidence from insiders. Therefore, providing adequate protections and incentives to whistleblowers is crucial. Brazil, like many countries, does not have a strong tradition or culture of whistleblowing, making it all the more important that the legal system provides sufficient protections and incentives for insiders to provide material information about corrupt schemes. In the past few years, Brazil has made important progress in this area, but much remains to be done.
Two years ago, a specific statute introduced the practice of rewarding people who furnished information about criminal conduct. This legislation provided that Brazilian states could establish telephone hotlines for reporting unlawful activities, and also authorized all levels of government to establish rewards for whistleblowers who provide information that lead to the prevention, detection, and punishment of crimes and administrative offenses. That statute, while a good first step, was vague and incomplete. Near the end of last year, Brazil took another important step in the direction of modernizing its whistleblower laws with the enactment of the 2019 Anti-Crime Act. This Act requires that national, state, and local governments, as well as their agencies and companies, establish an ombudsman office to ensure that all people can report crimes against public administration (including corruption), administrative offenses, and any action or omission damaging to the public interest. The law further provides that whistleblowers cannot be held criminally or civilly liable for the report (as long as the information was not provided falsely and maliciously), that whistleblowers are entitled to the protection of their identities, and that whistleblowers are entitled to the same protections against retaliation as are witnesses and victims. Violation of the prohibitions on retaliation against whistleblowers can entitle the whistleblower to double damages and punitive damages. The new law also includes a clearer provision on financial rewards for whistleblowers, expressly providing that if a whistleblower who provides information leading to the recovery of proceeds from crimes against public administration, the corresponding government can grant to whistleblowers financial rewards of up to 5% of the recovered assets.
Despite this progress, though, the legal framework on whistleblowers in Brazil still suffers from a number of important deficiencies, and needs further improvements:
- First, Brazilian law is still not sufficiently clear on the protection of whistleblowers’ anonymity. Although the current legislation states that whistleblowers are entitled to have their identities protected, it seems that the law still requires whistleblowers to furnish their personal data to the government entity receiving the report (e.g., the ombudsman office), and the statute further provides that the identity of the whistleblower will be disclosed when such disclosure is in the public interest or would be of concrete utility in the investigation of the facts. A subsequent rule—apparently intended to assuage concerns about preservation of whistleblower anonymity—only adds confusion. This rule states that the unveiling of a whistleblowers’ identity requires previous communication with and assent of the whistleblower. But the rule does not clarify what happens if the whistleblower does not consent to the disclosure of her identity. Will subsequent investigative steps be halted? Will the identity of the whistleblower really be kept secret? There are no obvious answers. It would be simpler and more effective if the legislation were amended to make clear that whistleblowers are entitled to file anonymous reports. (It is true that Article 5, clause 4 of the Brazilian Constitution prohibits “anonymity,” but the Brazilian Supreme Court has recognized that anonymous crime reports can be used in preliminary investigations.)
- Second, the financial rewards offered to whistleblowers are still too small and too uncertain. The 2019 Act restricts the reward to at most 5% of crime proceeds recovered as a result of the information provided. The percentage should be greater, reaching 20% or 30%, and should be applied not only to proceeds recovered, but also to fines imposed. This is especially important in the context of anticorruption investigations, which are often unable to recover substantial corruption proceeds if the defendants have already spent or successfully concealed their loot. Leaving the whistleblower without a reward just because no proceeds are recovered is not only unfair, but discourages whistleblowers from reporting corruption. After all, at the time of the report the whistleblower has no way of predicting whether the investigation will ultimately be able to recover corrupt proceeds. (Raising the percentage the whistleblower can recover, and applying that percentage to the full amount the defendant has to pay, including fines, would bring Brazil more into line with countries like the United States, where both the Internal Revenue Service and the Securities and Exchange Commission administer whistleblower reward programs, authorized by statute, that allow whistleblowers to recover up to 30% of the full monetary penalty.) Another issue here is that Brazilian law does not clarify whether whistleblowers are entitled to financial rewards if the whistleblowers themselves are implicated in the crimes. The most reasonable solution in such situations might be to allow the whistleblowers to recover a reward, but at a lower percentage. (This would parallel the U.S. approach under statutes like the False Claims Act.)