Under the Kleptocracy Asset Recovery Rewards Act (KARRA)* the reward will be provided to the persons disclosing the information which further leads to the restraint, seizure, forfeiture, or repatriation of assets or proceeds of foreign government corruption held at U.S. financial institutions or found in the United States or in the possession of U.S. citizens.
At the same time, the reward will not be provided to the individuals holding positions in the federal, state or local government bodies of the United States or abroad and disclosing information in the exercise of their official duties. Moreover, the reward may be denied or a reduced reward may be paid to the individuals with respect to whom there are reasonable grounds to believe that they knowingly premeditated, initiated and were directly involved or facilitated the underlying corrupt act.
According to KARRA, the reward can amount to $5 million, whereas the total amount of annual payments cannot exceed $25 million (however, both limits can be increased in exceptional circumstances).
The programme will be financed out of the federal budget in the first year of its implementation; at a later stage, the rewards will be funded with forfeited illicit assets.
The programme launched by KARRA is not the first U.S. whistleblower reward initiative aimed at countering corruption and financial crimes. For instance, we have already written about the whistleblower reward programme of the U.S. Securities and Exchange Commission (SEC). However, unlike the SEC’s programme, where the reward can be provided only if the offenders are held liable, under the programme of the Department of the Treasury it is sufficient that the reported information leads to the restraint, seizure, forfeiture, or repatriation of stolen assets with no requirements regarding successful court proceedings under the FCPA (or other act).
From this point of view, the KARRA programme provides potential corruption whistleblowers with new opportunities to be rewarded.
At the same time, some experts stress that the proposed version of KARRA leaves many issues unresolved. For example, KARRA does not provide any guidance on award amounts, including minimums or a proportion/percentage ratio between rewards and the total amount of forfeited assets. This underpins the environment where whistleblowers will not have clear understanding whether they will receive a reward. Furthermore, they will not be able to count on a more important reward in the event that they disclose information on multi-billion violations. As a result, potential whistleblowers will not have any additional incentives to disclose information (especially, about grand corruption), whose creation is actually the ultimate goal of any whistleblower reward programme.
Another considerable shortcoming is that KARRA, granting the powers to protect whistleblowers to the Department of the Treasury, does not contain confidentiality or anti-retaliation provisions, which seems to further discourage potential whistleblowers to report violations.
*The bill was drafted back in 2019, but it was subsequently vetoed by the U.S. President. On 1 January 2021 the Senate and the House of Representatives overrode the presidential veto, and KARRA was adopted as a part of the National Defense Authorization Act (NDAA) for the 2021 fiscal year.