Sunday Read: 2023 Whistleblower Forecast
This Sunday Read discusses predictions for whistleblower developments in 2023. Join NWC’s mailing list to stay updated on developments in the whistleblower world with National Whistleblower Center.
The whistleblower landscape seems poised for a busy year, as recent landmark federal legislation and a record number of claims in 2022 could set the course for more false claims and qui tam litigation.
Upside and downside risks from evolving sectors like fintech and cryptocurrency may inspire a huge surge in whistleblower claims. As the public’s understanding on whistleblowing matures, and the moral calling to do right continues to incentivize more brave people to come forward.
National Whistleblower Center (NWC) is committed to keeping you informed about the status of whistleblowers and the latest updates from around the world. In this Sunday Read, we take a explore trends and developments expected to impact the practice area.
Anti-Money Laundering: A New Era
With the Omnibus spending package approved by the U.S. Senate in December 2022, the Anti-Money Laundering (AML) Whistleblower Improvement Act (S.3316/H.R. 7195) became federal law, which many in the legal community view as a major victory in the fight for international justice.
The AML targets Russian oligarchs by establishing an effective whistleblower program to incentivize individuals across the globe to report money laundering and sanctions-busting schemes. The bill is modeled on the whistleblower provisions of the Dodd-Frank Act, which established the hugely successful SEC Whistleblower Program. Ukraine’s President Volodymyr Zelenskyy referenced the value of sanctions in his Dec. 21, 2022 remarks at the U.S. House of Representatives. AML whistleblowers supercharge the power of these sanctions by introducing robust detection and massive increases to the U.S. government’s ability to enforce these sanctions.
The House Committee on Financial Services’ report on the AML Whistleblower Improvement Act cited extensively the comments filed by the NWC on the bill. One of the Act’s cosponsors, Senator Chuck Grassley (R-IA), touted the National Whistleblower Center’s endorsement of the legislation.
Just prior to its passage in 2022, Stephen Kohn, Chairman of the Board at NWC, described the bipartisan bill as “the most important transnational anti-corruption whistleblower law that will be signed into law.”
Those sentiments were echoed by H. Vincent McKnight, Jr. an attorney in Washington, D.C. who noted that AML will open the door to “expose the world of dark money flowing through our system.”
“Previously, it was too easy for the real owners to hide their identities behind complicated corporate or trust structures, and this allowed dirty money to be repurposed into the economy,” said McKnight, Co-Chair of Sanford Heisler’s Whistleblower & Qui Tam Practice. “There are no statistics on the scope of this problem, but I anticipate a flood of claims.”
AML’s Financial Incentives
As Whistleblower Network News reported, one key AML provision ensures that whistleblower awards will no longer be discretionary. The AML Whistleblower Program now states that qualified whistleblowers will receive awards of “not less than 10%” of the sanctions collected in the relevant enforcement action.
The Act also establishes a fund to pay AML whistleblower awards, financed completely by sanctions collected in whistleblower-assisted cases and will not be funded by taxpayers.
NWC Executive Director Siri Nelson described the bill as a “a clear reflection of public support for whistleblower protections and incentives and the broadening understanding of the value whistleblowers bring to safeguarding our democracy.”
Maintaining the Quantity and Quality Of Claims and Awards
NWC recently noted that the SEC awarded $1.3 billion in monetary sanctions through 70 covered actions in its annual fiscal year report for 2022. Furthermore, it also received a record-breaking 12,322 whistleblower tips last year.
Michael R. Williams, an attorney in California, expects the trend to continue, possibly driven by claims tied to blockchain-based technology.
“As the economy potentially moves toward recession or slow down, there’s often an uptick in whistleblower claims and SEC complaints because people are let go and laid off,” said Williams, who leads his firm’s commercial litigation practice with a focus on qui tam suits under state and federal False Claim acts. “The appetite for whistleblowing on wrongdoing goes up.”
While the volume of claims the Department of Justice pursues is impressive in itself, Williams noted that an overabundance of tips — even valid ones — could exhaust the agency’s capacity.
“Hopefully, the agencies are being gatekeepers and only pursuing meritorious claims,” Williams said. “The only real danger I see is if agencies become so overwhelmed because so many claims are being filed that they can’t investigate all, and some meritorious claims fall through the cracks.”
An Eye On Emerging Tech, Cybersecurity and Data Privacy
Exposing malicious actors, discriminatory practices, waste dumping and other traditional whistleblower topics will likely continue to influence the practice area this year.
An example of big tech’s impact on whistleblowing can be found by several claims of allegations of wrongdoing at Tesla. In May 2022, NWC recognized seven Tesla employees who reported rampant harassment and misrepresentations at the electric car maker’s factories and via its vehicle’s components.
Additionally, mainstream headlines like the collapse of cryptocurrency exchange, FTX Trading — and related cybersecurity breaches — could usher in a new era of claims to be overseen by the U.S. Commodity Futures Trading Commission (CFTC). “Cryptocurrency in particular is a growth area both in terms of potential for fraud and the extent which the SEC is regulating it,” added Williams.
NWC has long drawn attention to the impact whistleblowers have on the tech industry and the time is ripe for regulatory improvements in this area.
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This story was written by Justin Smulison, a professional writer, podcaster and event host based in New York.
This article was sent as part of NWC’s “Sunday Read” series that aims to educate supporters about whistleblower stories and whistleblower legislative or policy initiatives and current events. For more information like this, please join our mailing list.
