Whistleblower Laws and Programs

The False Claims Act is the federal government’s primary tool for fighting fraud involving federal funds. It applies when individuals or companies submit false or fraudulent claims for payment to the United States — for example, overbilling Medicare, misusing federal grants, or selling defective products to the military.

• Qui Tam Actions: The FCA allows private citizens, called “relators”, to file lawsuits on the government’s behalf.
• Rewards: If the case is successful, whistleblowers can receive 15–30% of the amount recovered.
• Protections: The law prohibits retaliation, such as firing, demotion, or harassment, for lawful whistleblowing.

The U.S. Securities and Exchange Commission (SEC) encourages individuals to report violations of federal securities laws, including insider trading, accounting fraud, or misleading investors.

• Anonymous Reporting: Reports can be made through an attorney to preserve anonymity.
• Rewards: Eligible whistleblowers can receive 10–30% of monetary sanctions collected from successful enforcement actions.
• Protection: The SEC enforces anti-retaliation provisions under the Dodd-Frank Act.

The Commodity Futures Trading Commission (CFTC) handles misconduct in the derivatives, futures, and swaps markets.

• Covered Misconduct: Market manipulation, spoofing, false reporting, and other frauds involving commodities.
• Rewards: Similar to the SEC program — 10–30% of collected sanctions.
• Protection: Strong anti-retaliation provisions for lawful disclosures.

If you know about tax fraud or underpayment of federal taxes, the IRS Whistleblower Office can take action.

• Eligibility: Must involve significant tax underpayments or violations of tax laws.
• Rewards: Awards can be up to 30% of the amounts recovered.
• Confidentiality: The IRS keeps whistleblower identities confidential, though not always completely anonymous.

Anti–Money Laundering Whistleblower Program

The Financial Crimes Enforcement Network (FinCEN), part of the U.S. Treasury Department, runs a whistleblower program to encourage tips about violations of the Bank Secrecy Act (BSA) and other anti–money laundering (AML) laws.

Created and expanded under the Anti-Money Laundering Act of 2020 and the AML Whistleblower Improvement Act of 2022, the program offers:

• Monetary Awards – Whistleblowers can receive 10–30% of monetary sanctions over $1 million collected in cases based on their information.
• Broad Coverage – Includes violations of the BSA, U.S. sanctions laws, and related anti-money laundering statutes. This can involve banks, cryptocurrency exchanges, money services businesses, casinos, and other financial institutions.
• Confidentiality – FinCEN is required to protect the identity of whistleblowers to the fullest extent possible.
• Anti-Retaliation Protections – Covers employees and others who provide information to FinCEN or the Department of Justice.

Reports can be made directly to FinCEN through its secure channels or via legal counsel to preserve anonymity.

State False Claims Acts

Many states have their own False Claims Acts modeled on the federal FCA. These laws target fraud involving state funds (like Medicaid) and often mirror the federal reward and protection system.

• Some states allow whistleblower suits for tax fraud, such as New York, expanding beyond the federal FCA’s limits.
• Reward ranges and procedures vary by state.

California Insurance Frauds Prevention Act (IFPA)

The California Insurance Frauds Prevention Act (Cal. Ins. Code §§ 1871.7 et seq.) is a state law that empowers whistleblowers to take legal action against insurance fraud — including fraud against private insurers — through a qui tam lawsuit.

Modeled on the federal False Claims Act, the IFPA allows private citizens to sue on behalf of the state when someone knowingly presents a false or fraudulent claim to an insurer in California.

Key Features:

• Covers Private Insurance Fraud – Applies to many types of insurance, including health, auto, and workers’ compensation.
• Qui Tam Lawsuits – Whistleblowers can file in court and share in the recovery if the case succeeds.
• Rewards – Relators may receive 30–50% of the penalties and damages recovered, depending on whether the state intervenes.
• Penalties – Violators can face civil fines of $5,000–$10,000 per false claim, plus triple damages.
• Protection – The law prohibits retaliation against employees or others for lawful whistleblowing.

The IFPA is unique because, unlike most whistleblower laws, it targets fraud against private insurers, not just government programs.