| NEW YORK, July 21
NEW YORK, July 21 BNP Paribas SA's $9
billion settlement with U.S. authorities, aided by internal
whistleblowers, has spurred calls for federal banking regulators
to protect and reward individuals who report wrongdoing by
The U.S. Securities and Exchange Commission has scored big
enforcement successes and delivered millions of dollars in
awards to whistleblowers under a program from the 2010
Dodd-Frank overhaul of Wall Street. The Commodity Futures
Trading Commission, as well as the SEC, will provide
whistleblowers with a share of fines collected.
"We have a (whistleblower) law that covers tax fraud and
fraud against the government (and) commodities and securities
violations, but we don't have similar laws for banking
regulators," said Jordan Thomas, head of the whistleblower
representation practice at law firm Labaton Sucharow and an
architect of the SEC's program. "To me, that is a significant
Whistleblowers played a prominent part in the case of French
bank BNP Paribas, which on June 30 pleaded guilty to two
criminal charges and agreed to pay nearly $9 billion to settle
charges that it violated U.S. sanctions.
Thomas said he regularly received calls from people who want
to report violations of banking law. "I have to tell them there
is not an avenue for them to report and receive a monetary
reward," he said.
The New York Department of Financial Services, which has
jurisdiction on Wall Street, has pushed for state legislation to
expand whistleblower protections to banks and insurance
The bill would allow whistleblowers to share in fines
resulting from information about violations of insurance,
banking or financial services law. It would also protect
whistleblowers from retaliation by their employers.
National banking representatives have opposed such
Asked about its position on expanded whistleblower
protections, the American Bankers Association pointed to a 2010
regulatory filing opposing the SEC's proposed program. It had
warned the program would encourage individuals to "avoid even
the most highly effective internal (reporting) policies in order
to preserve and protect the possibility, no matter how remote,
of receiving large cash awards."
Eight whistleblowers have received awards ranging from the
low six-figures to as high as $14 million through the SEC's
program since it began in late 2011. The CFTC, meanwhile, issued
its first award, of $240,000, in May.
Incentives for reporting wrongdoing should be part of any
new banking reforms, advocates said. "Because we have had an
enforcement approach to compliance, and not an incentive
approach, we haven't put enough effort in looking at rewarding
good behavior and this kind of reporting," said Jennifer Arlen,
co-director of the Program on Corporate Compliance and
Enforcement at New York University Law school.
There is no sign that Congress or federal banking regulators
are devising plans for a new whistleblower program.
The New York State proposal, introduced last year at the
department's request, was not acted on in this year's session. A
spokesman for Republican bill sponsor James Seward said it could
come up in 2015. Department of Financial Services Superintendent
Benjamin Lawsky's office did not respond to questions about it.
The proposal noted that "sanctions against employers who
retaliate against whistleblowers are currently quite limited in
A Federal Reserve spokesman said there had been no specific
public discussion by any board members of a whistleblowing
program, and he declined to speculate on any future plans.
BNP, BARCLAYS AND WHISTLEBLOWERS
In the BNP Paribas case, the U.S. Justice Department
included evidence that internal staff had alerted senior
management in vain about efforts to conceal transactions with
Sudan, Cuba and Iran, all in violation of U.S. sanctions.
In addition, a lawsuit brought last month by the New York
Attorney General's office against Barclays Plc over
alleged improprieties in its "dark pool" trading business
depicted a workplace that discouraged reporting concerns.
The complaint against Barclays cited the firing of a bank
director who refused to alter an analysis that could have
alerted customers who were allegedly being misled about their
Barclays has hired outside lawyers to help it investigate
the allegations and has until July 25 to decide whether to
(Reporting by Henry Engler of the Compliance Complete service
of Thomson Reuters Accelus; Editing by Randall Mikkelsen and
Lisa Von Ahn)