How China and the US are emboldening whistle-blowers in the fight against corporate corruption

Andy Rickman says support from China’s anti-corruption campaign and millions in rewards offered by America have seen a surge in whistle-blowers from the mainland and Hong Kong, encouraged in particular by the GSK case

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China offers many opportunities for corporate whistle-blowers who want to obtain a reward for reporting violations of America’s Foreign Corrupt Practices Act to the US Securities and Exchange Commission. Photo: Bloomberg

Published: 12:38pm, 27 Nov 2017Updated: 7:18pm, 27 Nov 2017

The US Securities and Exchange Commission’s recently released 2017 whistle-blower report shows a 72 per cent increase in informants coming from mainland China and Hong Kong.

In 2016, a total of 36 people who filed reward submissions under the Dodd-Frank Act were from the mainland and Hong Kong, compared with 62 this year.

Our law group, a Dodd-Frank whistle-blower firm, has witnessed the surge in whistle-blower clients from China as a result of Beijing’s anti-corruption efforts and the US government’s recent reward payouts, now exceeding US$162 million to international and American whistle-blowers.

The Chinese government’s continued efforts to stop corporate corruption have been noticed by employees of US-traded companies working in China. These current and former employees of companies that are regulated by the US Securities and Exchange Commission (SEC) – or who work for affiliates, subsidiaries or joint venture partners of such companies – are now feeling more emboldened to report their companies’ corrupt practices in China under the reward programme established by the Dodd-Frank Wall Street Reform and Consumer Protection Act.

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China offers many opportunities for corporate whistle-blowers who want to obtain a reward for reporting violations of the Foreign Corrupt Practices Act to the SEC. SEC-regulated companies doing business in China will inevitably have to deal frequently with government agencies, regulators and state-run businesses. This means there are many opportunities for corporate corruption and for whistle-blowers to report it.

The Dodd-Frank Act created a reward programme that pays whistle-blowers who report securities violations of SEC-regulated companies. Payouts are made as long as the case results in a penalty in excess of US$1 million, which happens in the vast majority of corporate settlements under the Foreign Corrupt Practices Act.