A financial fraud whistleblower is an individual who reports illegal, unethical, or fraudulent activity that could harm investors or the financial system. The types of fraudulent activities they report range from securities and accounting fraud to money laundering, tax evasion, and other forms of financial misconduct.

They are most commonly insiders of the companies in which they work, and likely to have greater access to evidence of fraudulent activity. This may include financial records, electronic communications, internal reports, contracts, and other data.  

Their position as an “insider” within a company makes them a valuable tool for enforcement agencies and are eligible for awards for their willingness to assist with investigations. This can range between 10% to 30% depending on the award program. 

Whistleblowers who discover financial fraud have the option of reporting their concerns internally using a company hotline, which has been established by the company. It’s up to the company to take appropriate action to address the employees’ concerns and remedy the situation to avoid further financial harm.

Most whistleblowers, however, decide to report their concerns externally to regulatory bodies like the Securities and Exchange Commission (SEC), the Commodity Futures Trading Commission (CFTC), or the Internal Revenue Service (IRS).

What is the reason for this?

Whistleblower protection laws exist to shield these individuals from retaliation, such as job loss or harassment. In many cases, whistleblowers may also be eligible for financial rewards if the information they provide leads to successful enforcement actions.

Below are the programs financial fraud whistleblowers can use if they spot fraud: 

Established Under Dodd-Frank

• SEC Whistleblower Program: this program covers insider trading, accounting fraud, market manipulation, and false financial reporting, among others. Eligible whistleblowers can receive 10% to 30% of the monetary sanctions collected in successful enforcement actions. However, the information provided must be “original” and lead to an action with monetary sanctions exceeding $1 million. The Dodd-Frank Act provides strong anti-retaliation protections for SEC whistleblowers.
• CFTC Whistleblower Program: this program covers market manipulation and fraud related to futures, options, and swaps. Like the SEC program, awards range from 10% to 30% of monetary sanctions, when a whistleblower provides “original” information leading to sanctions over $1 million. This program has strict reporting procedures, and failure to follow those procedures may result in a case being denied or dismissed. Like the SEC whistleblower program, the Dodd-Frank Act also provides anti-retaliation protections for CFTC whistleblowers. 

Tax Whistleblowers

• IRS Whistleblower Program: this program covers tax fraud and evasion, such as underreported income, failure to pay taxes owed, hiding assets offshore, or falsifying records. Whistleblowers may receive 15% to 30% of the collected proceeds. However, the total amount in dispute for a company (including taxes, penalties, and interest) must exceed $2 million. For individuals, their gross annual income must be at least $200,000 for at least one of the tax years in question. The IRS whistleblower program also includes provisions that protect whistleblowers from retaliation, although the level of protection can vary. 

Money Laundering

• FinCEN’s AML Whistleblower Program: this program covers violations of anti-money laundering (AML) laws, including the Bank Secrecy Act (BSA), such as failing to establish or maintain adequate AML programs, structuring transactions to avoid reporting requirements, money laundering, and the financing of terrorism. Whistleblowers may receive a monetary award between 10% and 30% of the monetary sanctions collected by the government. The Anti-Money Laundering Act (AMLA) includes provisions that protect whistleblowers from retaliation. 

Government Contract Fraud

• False Claims Act: this law can be used in cases involving fraud against the government. It allows individuals to file “qui tam” lawsuits on behalf of the government, recovering funds lost due to fraudulent activities, including healthcare fraud (Medicare or Medicaid), defense contractor fraud, or other instances where government contracts and funds were involved. If the government intervenes in the lawsuit, the whistleblower (known as the “relator”) can receive between 15% and 25% of the recovered funds. If the government chooses not to intervene and the relative pursues the case independently, they can receive between 25% and 30% of the recovered funds.The False Claims Act has robust anti-retaliation provisions that protect individuals who file qui tam lawsuits. 

Whistleblowers play a massive role in maintaining transparency, accountability, and ethical conduct within society, and protect investors and markets from financial ruin. 

Sherron Watkins (Enron)

She was a vice president at Enron who alerted then-CEO Kenneth Lay to accounting irregularities that led to the company’s collapse. Her warnings highlighted the massive accounting fraud that had been occurring.  

Cynthia Cooper (WorldCom)

As vice president of internal audit at WorldCom, she uncovered billions of dollars in accounting fraud, leading to the company’s bankruptcy. 

Richard Bowen (Citigroup)

He was a senior vice president and underwriter at Citigroup who warned of the risks associated with the company’s subprime mortgage lending practices before the 2008 financial crisis. 

Mark Whitacre (Archer Daniels Midland)

He exposed a massive price-fixing scheme at Archer Daniels Midland (ADM), working undercover with the FBI. His story was depicted in the film “The Informant!”  

Michael Woodford (Olympus)

As the former CEO of Olympus, he exposed a massive accounting fraud within the company, despite facing significant resistance and retaliation. 

A financial fraud whistleblower is someone who brings hidden financial wrongdoing to light. Then often provide the “insider” view, giving authorities the detailed information they need to investigate and prosecute financial fraud.  

Various whistleblower programs are designed to incentivize and protect those who come forward with information about wrongdoing. These programs are vital for detecting and deterring financial fraud, and they rely on the courage of individuals to come forward. 

For over 35 years, our team has worked on some of the largest whistleblower cases in history and have the experience to take on the toughest opponents. If you know of a financial fraud occurring, contact one of our financial fraud whistleblower attorneys today for free and confidential consultation. In most cases, there’s no fee unless we win your case.