Karnataka govt announces reward scheme for whistleblowers in financial frauds

Whistleblowers will be paid upto Rs 2 lakh if their information results in the identification and attachment of assets of financial establishments and their "colluders".

Bengaluru: Whistleblowers and informants, who expose deposit-related frauds at financial establishments, can win a reward of up to Rs 7 lakh under a new scheme notified by the government. 

The government hopes to go after Ponzi schemes and other such frauds by incentivising people to come forward with credible information. 

The new scheme will apply to “original information” provided by whistleblowers and informants on illegalities committed by owners, promoters, partners, directors, managers or any related person at deposit-accepting companies, cooperative societies, limited liability partnerships, trusts and nonprofits. 

Under this scheme, whistleblowers will be paid Rs 2 lakh if their information results in the identification and attachment of assets of financial establishments and their "colluders". 

Informants can win a higher reward. "The interim reward amount shall not exceed 2% of the reserve price of the asset regarding which information was furnished or Rs 2 lakh, whichever is less," the notification states.

"Final reward amount shall not exceed 5% of the dues recovered and recovery of which is directly attributable to the original information supplied by the informant or Rs 5 lakh, whichever is less or such higher amount as approved," it states. 

The scheme defines 'informant' as an individual who voluntarily furnishes original information in writing to the government.

A 'whistleblower' is a person who provides information about illegal, unethical or harmful activities within a financial establishment, and is not a person participating or complicit in such frauds. 

"The claim of reward shall be confined to cases where recovery of dues (and) realisation of the sale proceeds of the asset may be made in pursuance of the information so provided by the informant. The information provided must be supported by documents pointing to the ownership or transfer of the asset, with
reasonable connection to the money trail and shall be specific and actionable," the notification states. 

Finance Secretary (Fiscal Reforms) Dr Vishal R said the scheme was formulated based on a recommendation by senior IAS officer Amlan Aditya Biswas, who is the competent authority in the multi-crore IMA scam, which affected thousands of depositors.

"We want people to come forward and complain against monetary and financial scams," Vishal said. 

The scheme will operate under the Karnataka Protection of Interest of Depositors in Financial Establishments Act, which was enacted following the Vini Vinc Shastri scam. Despite the law, deposit-related scams have continued.