Following a year of new DOJ policies and guidance designed to incentivize companies to self-report misconduct and to cooperate with government investigations, the DOJ has added a new pilot whistleblower rewards program. In their remarks at the American Bar Association’s 39th Annual National Institute on White Collar Crime, Deputy Attorney General Lisa Monaco and Acting Assistant Attorney General Nicole Argentieri both explained that the new whistleblower policy is designed to incentivize individuals to disclose corporate misconduct through financial rewards from any resulting forfeiture of criminal proceeds. Monaco also announced sentencing enhancements applicable to individual and corporate prosecutions for the misuse of artificial intelligence (AI), and warned compliance officers that the DOJ will consider how well a company mitigates the risk of AI when assessing a company’s compliance program.
The New Carrot: The Whistleblower Pilot Program. Monaco began her speech reiterating the DOJ’s focus on investing the most significant resources in the most serious cases, holding individuals accountable, and pursuing tough penalties for repeat offenders. As she has in previous speeches, Monaco again discussed the DOJ’s “carrot-and-stick” approach to combatting corporate malfeasance, announcing a new whistleblower pilot program. Similar to the awards awarded to whistleblowers under the False Claims Act, whereby a whistleblower can receive a portion of the government’s recovery, under the DOJ’s new whistleblower program, if an individual reports new corporate or financial misconduct to the DOJ, that individual could be awarded a portion of recovered forfeiture. Monaco acknowledged the history of successful federal whistleblower reward programs, such as those offered by the Securities and Exchange Commission (SEC) and the Commodity Futures Trading Commission (CFTC), but explained that this initiative is intended to fill gaps in other agencies’ programs. For example, Argentieri highlighted, the DOJ anticipates that the program could prove especially useful in developing foreign corruption cases that are outside the jurisdiction of the SEC, including FCPA violations by non-issuers.
The DOJ plans to develop and implement the pilot program in the next 90 days, with a formal start date later this year. Thus far, the basic guiderails to providing payments to whistleblowers, as further outlined by Argentieri, are as follows:
- The information provided must be original, nonpublic, truthful, and not already known to the government, such that the whistleblower is the “first in the door” providing the information.
- The whistleblower cannot have participated in the wrongdoing disclosed.
- Recovery is only available after victims are first compensated for their loss.
- Recovery is only permitted in cases where there isn’t an existing financial disclosure incentive, including rewards under the False Claims Act or other federal whistleblower program.
- The program, similar to the SEC and CFTC programs that limit rewards to cases in which the agency orders sanctions of $1 million or more, will have a monetary threshold to focus DOJ resources on the “most significant cases.”
The whistleblower program appears to be the latest tool in the DOJ’s overall strategy to hold individuals accountable, to encourage companies to “step up and own up,” and to promptly report misconduct to the government. Whether viewed as deputizing companies or just seeking active cooperation, through this new tool the DOJ hopes not only to uncover misconduct, but also to push companies to voluntarily self-report. And, like the DOJ’s policy regarding voluntary self-disclosure, the new whistleblower program guidance is clear: only the first one in the door benefits. Accordingly, companies may now be more willing to voluntarily self-disclose conduct for fear that a whistleblower, with a large financial incentive, could beat them to the punch. Monaco also stated that the DOJ will be evaluating the success of the whistleblower pilot programs recently announced by the U.S. Attorney’s Office for the Southern District of New York and the Northern District of California. Those programs incentivize self-reporting by offering non-prosecution agreements, rather than financial awards, to potential whistleblowers that participated in the misconduct.
Combatting the Risk of AI. In addition to the whistleblower program, Monaco also announced that the DOJ is committed to combating the risks posed by AI, which can be used to “supercharge” illegal activity. She specifically mentioned the use of AI in fraud, price fixing, and market manipulation schemes. The DOJ’s focus on AI will manifest in two ways. First, prosecutors will impose stiffer sentences on individual and corporate defendants that deliberately misuse AI to perpetrate white-collar crime. Second, prosecutors will “assess a company’s ability to manage AI-related risks as part of its overall compliance efforts.” This will be part of the DOJ’s Evaluation of Corporate Compliance Programs.
Monaco’s announcement should prompt companies to ensure that they have sufficiently incorporated AI risk management into their compliance program. Companies already using automated trading likely have thought about the risks AI poses. But even for companies that are not engaged in AI-based trading, it is clear that the DOJ expects compliance programs to have tools to detect and combat the potential misuse of AI.
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