NEW YORK: BNP Paribas SA’s $9 billion settlement with US authorities, aided by internal whistleblowers, has spurred calls for federal banking regulators to protect and reward individuals who report wrongdoing by banks.

The US Securities and Exchange Commission has scored big enforcement successes and delivered millions of dollars in awards to whistleblowers under a programme 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 programme. “To me, that is a significant gap.”

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 $9bn to settle charges that it violated US 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 companies.

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.

Industry opposition

National banking representatives have opposed such whistleblower programmes.

Asked about its position on expanded whistleblower protections, the American Bankers Association pointed to a 2010 regulatory filing opposing the SEC’s proposed programme. It had warned the programme 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 $14m through the SEC’s programme since it began in late 2011. The CFTC, meanwhile, issued its first award, of $240,000, in May.—Reuters

Published in Dawn, July 22nd, 2014