Because they have evidence: Globalizing financial incentives for corporate fraud whistleblowers

The power and size of supranational corporations in the global economy has increased their ability to strategically formulate, undertake and hide lucrative organizational corruption, bribery and fraud on the public purse (Faunce 2006). This chapter reviews the published state of research on financial incentives to individuals who have inside knowledge of corporate fraud and who come forward to regulators. Internal informants represent one of the most significant sources of evidence of corporate fraud. For this reason, this chapter will explore research on the nature and effectiveness of the financial incentives system for whistleblowers under the US False Claims Act, 31 USC (FCA), and examine whether it could provide a good governance model for more widespread international use. More specifically, this chapter first presents an overview of the FCA and analyzes how its basic mechanisms have been implemented at the federal and state levels in the United States. It then compares those features of the FCA to jurisdictions outside the Unites States which similarly provide material incentives, assistance or compensation for informants (whether institutionally internal ‘whistleblowers’ or external ‘bell-ringers’, see Miceli, Dreyfus and Near, Chapter 3) about fraud on the public purse. It will highlight which features of the FCA system have emerged from the preceding analysis as crucial elements of that system’s effectiveness. Finally, the chapter will explore international trade and investment agreements as mechanisms for globalizing an anti-fraud model drawing upon the essential features of the FCA.