12 April 2011

Although something of an ethical challenge, a number of regulators pay informants. Internationally, it is a long standing Police practice. Recently there has been considerable debate about new provisions for the US Securities and Exchange Commission to make bounty payments to informants.  A concern is that employees will be discouraged from advising management about unlawful activities.  Instead they may well bide their time until offending gets to the extent that reporting to SEC will bring a substantial reward.

A British Government website notes that there should be no stigma attached to being a Police informer. It helps to keep the community safe and provides Police with information that will assist in their role. The Serious Fraud Office, Revenue Service and Office of Fair Trading  in the UK  have longstanding informant reward programmes. Crimestoppers in Britain also offers payments for information leading to arrest and prosecution.  The money is paid through a bank on a coded instruction, without the need to provide details disclosing the informant’s identity.

The US Inland Revenue Service has had a whistleblower reward scheme for several years.  The first payment under the scheme was made last week, when a company accountant received a $3.2 million cheque (tax having been deducted from the 22% “cut” on tax recovered!) for reporting tax evasion by the financial services firm where he worked.

IRD in New Zealand has an on line form encouraging the reporting of tax evasion.  There is however, no suggestion of a bounty payment, and the form anticipates that informants will usually wish to remain anonymous to the IRD.

Although there is no legal duty to report offending, most State services agencies have a policy obliging employees to disclose workplace misconduct.  The Protected Disclosures Act provides some assurance of identity protection in those circumstances.