A whistleblower is an individual who publicly informs or discloses the corruption or wrongdoing within a financial institution. Typically whistleblowers are classified by type: employee-informants are individuals that work in the organization, while tipsters are individuals who have information of wrongdoing and may not necessarily work for the financial institution.
Industry insiders are usually individuals that work in the industry and have inside information; these employees may be employed with banks, savings associations, credit unions, loans and loan servicing, check guarantee, debt collection, and credit scoring and reporting, etc.
In 2010 Congress approved the Wall Street Reform and Consumer Protection Act. This Act established new whistleblower programs and protections, providing whistleblowers with financial incentives for coming forward with information on violations of consumer laws and regulations in the financial industry. Also the Dodd Frank Act created other officers that whistleblowers can contact to blow the whistle on financial institutions. Securities and Exchange Commission formed the office of whistleblower. This office allows whistleblowers to come forward with wrongdoing. In addition the newly created agency Consumer Financial Protection Bureau established in 2010, open the office of whistleblower. Finally no matter what the violation is whistleblowers can contact Department of Labor- Occupational Safety and Health Administration office of whistleblower. This office provides protections and enforces laws protecting employees. If money is collected due to whistleblower actions, whistleblowers can receive up 10% to 30% of whatever the government collects.
During fiscal year 2014 the U.S. Department of Justice collected $24 million. However, most of the money consists of criminal penalties and forfeitures; much of it was generated by whistleblower claims. (‘Thank You Whistleblowers’, 2014). Whistleblowers in the financial industry have typically been viewed and received as troublemakers however, whistleblowing could actually benefit businesses in a number of ways, including reducing exposure to risk, and protects firms financial interest.
Financial institutions that have been subjected to discipline, thought regulatory enforcement actions and a whistleblower was not involved have faced a much larger penalty. The study, named “The Impact of Whistleblowers on Financial Misrepresentation Enforcement Actions,” found on average, financial firms penalties associated with whistleblower involvement are $92.88 million more than when no whistleblower is involved. Yes even the Executives and personnel at financial firms paid the whistleblower involvement and enforcement actions are penalized $56.50 million more and usually have lengthy prison terms. (“The Impact of Whistleblowers on Financial Misrepresentation Enforcement Actions,” 2014). By allowing the whistleblower to come forward already saved the financial institution $36.38 million in penalties.
Exposing financial firm’s wrongdoing in the public eye may not best interest for the whistleblower and financial firm. This would exclude the financial institution and whistleblower negative press. For example, if a whistleblower comes forward with damaging information about wrongdoing in a financial institution; and information is deemed truthful; it could harm the financial institution business in various ways. For example, if a financial institution depends on consumers for revenue, usually banks or investment firms, or any financial institution that may charge a fee for services. Consumers may change financial institutions based on possible wrongdoing fearing financial uproar with the financial institution. After the 2008 financial crisis, consumers want financial security with no issues with financial institutions and allegations of corruption.