Rewarding Whistleblowing to Fight Kleptocracy

Last February, Massachusetts Congressman Stephen Lynch introduced the Kleptocracy Asset Recovery Rewards Act (KARRA), which seeks to improve detection of stolen assets housed in American financial institutions by paying whistleblowers for reports that lead to the identification and seizure of these assets. The logic of paying rewards to whistleblowers is straightforward, and nicely summarized in the draft KARRA itself:

The individuals who come forward to expose foreign governmental corruption and klep­toc­ra­cy often do so at great risk to their own safety and that of their immediate family members and face retaliation from persons who exercise foreign political or governmental power. Monetary rewards and the potential award of asylum can provide a necessary incentive to expose such corruption and provide a financial means to provide for their well-being and avoid retribution.

Paying whistleblowers for information is a sound economic idea.  But in light of the cogent explanation for these rewards, the original draft of the KARRA legislation doesn’t go nearly far enough. Indeed, this original proposal provides much weaker incentives and protections for whistleblowers than several other existing US whistleblower rewards programs. It is unlikely that this bill has a real chance of being enacted in the current Congress, but if its introduction this year is a harbinger of a more sustained effort to enact legislation of this kind—and I hope it is—then I also hope that the next time around KARRA supporters will introduce a more ambitious bill, one that provides much higher potential rewards, fewer limitations on which whistleblowers are eligible for rewards, and more robust anti-retaliation protections.

There are many ways to design a whistleblowing program, as demonstrated by the spectrum of existing programs that use whistleblowing to tackle fraud in other domains. We can examine the effectiveness of the proposed legislation through comparison to existing whistleblowing programs:

Continue reading

Planning and Zoning Board Corruption: Finding the Missing Whistleblowers

My last post looked at the constant, pernicious corruption and conflict of interest in local land use planning decisions in the United States. Despite shocking stories and a handful of high-profile investigations and prosecutions (see, for example, here and here), little comprehensive work has been done to address the potential for corruption in planning and zoning decisions, even when warning signs abound. Instead, most instances of corruption in land use planning decisions remain undetected, perhaps because the seemingly small stakes make it unlikely that external investigators will scrutinize these decisions too closely.

Yet potential whistleblowers surely see or suspect bribery, conflicted dealings, or other malfeasance in land use planning. Reforms should make it easier for those individuals to come forward, as well as make it more likely that their reports will lead to action. Ideally, these measures would recognize the particular characteristics of land use decisions, such as the challenges posed by the large numbers of local officials involved in planning and zoning. Here are a few suggestions for how to encourage simpler, more consistent reporting:

Continue reading

Nigeria’s Whistleblowing Policy: A Good Start, But Not Enough

On December 21, 2016, Nigeria’s Federal Ministry of Finance approved a whistleblowing program as part of the Nigerian government’s continued efforts to fight corruption. Key features of the program include the launch of an online portal for submission of tips and the establishment of a reward for “information that directly leads to the voluntary return of stolen or concealed public funds or assets” (the reward is 2.5 to 5% of the amount recovered, with the percentage decreasing as the amounts recovered increases). As over $176 million in stolen funds was recovered within the first two months of the program, the whistleblowing policy appears to be an overnight success story. Nevertheless, although stolen funds are indeed being recovered, the existing policy does not do enough to offset the risks that whistleblowers face when they come forward with information, and this deficiency may limit the long-term effectiveness of the program. In particular, there are three aspects of the program that the government ought to reform in order to encourage individuals to assume the risks associated with becoming a whistleblower, and consequently to ensure the policy’s continued success. Continue reading

The Opportunity to Address Kenya’s Corruption Problem

With the Kenyan Presidential elections on the horizon in 2017, incumbent President Uhuru Kenyatta, who hopes to continue his regime, has spoken out against corruption, emphasizing that combating this widespread problem requires effort on the part of every Kenyan. In his first term, President Kenyatta had shown promising signs of staying true to his philosophy of holding everyone accountable by actually getting rid of members of the Cabinet. Yet Kenya’s recent history makes many skeptical. For over a decade, Kenyan presidents have been pledging to get corruption under control. In 2003, newly-elected President Kibaki promised to stamp out corruption in Kenya. He proceeded to enact two important pieces of legislation in his first year: the Anti-Corruption and Economic Crimes Act, which established the Kenya Anti-Corruption Commission (KACC) to investigate corruption and educate the public, and the Public Officer Act, which required all public officers to declare their wealth. Yet at the end of President Kibaki’s decade-long regime, the situation remained bleak, with corruption running rampant. Kenya’s education sector offers a particularly troublesome glimpse into the continued prevalence of the problem. A 2010 forensic audit of Kenya’s Education Sector Support Programme found that misappropriation of funds and leakages in transfer of cash and materials from the Ministry of Education to schools, as well as other types of private embezzling and mis-accounting of funds, had led to the loss of 4.2 Billion Kenya Shillings (US$55 million) that was originally intended for education. Furthermore, most of the suspected actors went unpunished; even when caught, the culprits were either transferred to new departments or at most suspended from their role.

As for President Kenyatta’s more recent efforts, the President claims that he has done his part in the anticorruption fight and is frustrated by the lack of complementary efforts by others. Yet many critics claim that President Kenyatta has not demonstrated the political will necessary to fight corruption. And some have gone further, accusing the president of suspect and excessive awarding of government contracts to companies like Safaricom without an open bidding process. Safaricom have been involved in multiple corruption scandals already, leading to suspicions of bribery. Critics have also been highlighting the fact that those close to Kenyatta seem immune from serious scrutiny for corrupt acts.

Even if we put those concerns to one side, and assume that both President Kenyatta and President Kibaki before him were acting in good faith, the numerous anticorruption initiatives undertaken by both administrations do not seem to have had much of an impact. There are a few things that Kenya’s next president—whether it is Kenyatta or someone else—could do that would go further in making progress against the corruption problem than the measures that have been adopted so far: Continue reading

Reporting Corruption Easily and Safely: Papua New Guinea’s Phones Against Corruption Initiative

Nick Brown, head of Global Distribution for Mobimedia International, contributes the following Guest Post.

 Persuading corruption victims to complain remains one of the great challenges to combating corruption.  Policymakers can’t prioritize prevention efforts or know where to deploy enforcement resources if they don’t know who is demanding bribes where and from whom. But getting citizens to blow the whistle is no mean feat.  Citizens must be convinced it is worth the effort, that something will happen if they do speak up.  Citizens must also be assured they will be safe if they do, that the corrupters will not harm them or their loved ones, financially or physically.

With its “Phones Against Corruption” initiative, the Government of Papua New Guinea has hit upon a way that citizens can easily and safely report corruption complaints, and since its launch in 2014, with technical support from Mobimedia International and financial backing from UNDP and Australia, it has taken off.  Critical to its success is that it makes no technological or financial demands on PNG’s limited capacity.  It requires no more technological sophistication from citizens than the ability to send a text message, a form of communication widely used throughout the country. How does it work? Continue reading

Whistling in Chorus: The Potential Impact of the Rise of Parallel Prosecutions on Whistleblower Regimes

A few months ago, Chinese officials announced a number of new incentives for whistleblowers to come forward to disclose corporate wrongdoing: pledging to develop protection plans for whistleblowers when necessary to “prevent and end acts of retaliation” and increasing the rewards whistleblowers could potentially receive to approximately $33,000 for “actionable information” (with even greater sums available for “significant contributions of information”).  While these policies are fascinating in their own right, they also feed into a larger discussion that has been taking place both on this blog and in other forums, regarding what impact, if any, an increased commitment to anticorruption norms by demand-side countries may have upon the current anticorruption regime. A number of authors have already discussed this phenomenon both in broad strokes and specifically within the context of China’s increased enforcement of anticorruption laws (though some have suggested China’s recent, high-profile corruption prosecutions, including a $490 million fine of GlaxoSmithKline, may serve as a cover for protectionist policies).  One area that may warrant further consideration, however, is the likely impact that the rise of demand-side prosecutions and the resulting potential for parallel enforcement by demand-side and supply-side countries may have upon these states’ whistleblowing regimes.

While the ways in which the increased prevalence of demand-side corruption prosecutions will impact the interactions between supply- and demand-side countries’ anticorruption regimes remains unclear, this phenomenon seems likely to result in one of two possible outcomes with respect to states’ attitudes towards whistleblowers. First, countries may perceive some benefit to ensuring that they are the only–or, at the very least, the first–government to receive a whistleblower’s report.  Second, states may alter their whistleblowing policies to reflect the fact that whistleblowers can potentially report to, and be rewarded by, both demand- and supply-side countries.  While the impact of these different scenarios on the ways in which whistleblowing protections and incentives will develop over time may be quite different, both appear disadvantageous to states’ anticorruption efforts, to the whistleblowers themselves, or both.

Continue reading

A Problematic Proposed Whistleblowing Law in Switzerland

Switzerland is currently not a particularly hospitable country for whistleblowers.  The anti-retaliation protections provided to potential whistleblowers are relatively sparse – individuals fired from their jobs can, at best, hope to receive up to the equivalent of six months of their salary rather than reinstatement – and there are few legislative incentives in place to encourage individuals to report corruption or other forms of corporate wrongdoing.  Moreover, not only are the country’s laws rather harsh when it comes to encouraging and protecting whistleblowers in the private sector, commentators have noted the “brutally hard line” that the Swiss government has taken in a number of high-profile whistleblower prosecutions.

Unfortunately, a proposed law which has passed the country’s Council of States and will be considered by its National Council, initially billed as an attempt to address ambiguities within the current whistleblower system, appears likely, if enacted, to make an already hostile climate for whistleblowers even worse.

Continue reading