Much of the industrial logging of forests is unsustainable and illegal, with as much as 23% to 30% of hardwood lumber and plywood traded globally potentially coming from illegal logging activities. According to INTERPOL, illegally harvested timber is estimated to be worth between $51 and $152 billion USD annually. This vast criminal operation threatens endangered species, jeopardizes the safety and livelihoods of local communities, and distorts global markets.
While several U.S. laws exist to regulate this trade, they lack some of the most effective whistleblower provisions that would allow citizens to help combat pervasive illegal logging. Future legislation and policy aimed at curbing the illegal timber trade must adopt the Dodd-Frank Act whistleblower provisions in order to effectively protect and incentivize whistleblowers – the first line of defense against fraud and corruption.
Passed in 2010 after the financial crisis, the Dodd Frank Act is a major Wall Street reform law that covers commodities and securities actions worldwide, aiming to promote financial stability by improving accountability and transparency. When enacted, the Act created offices at the U.S. Securities and Exchange Commission (SEC) and the Commodity Futures Trading Commission (CFTC) specifically designed for receiving and investigating whistleblower disclosures, as well as strengthened the whistleblower provisions in the Foreign Corrupt Practices Act (FCPA).
Under Dodd-Frank, whistleblowers who provide original information that leads to a successful enforcement action over $1 million are entitled to a mandatory reward between 10% to 30% of the collected proceeds. Critically, this applies transnationally: whistleblowers outside of the United States can also be entitled to a financial reward for providing original information on covered wrongdoing to the SEC or CFTC as long as there is a U.S. nexus for the crime.
Additionally, Dodd-Frank provides necessary protections for the confidentiality of whistleblowers’ identity as well as remedies for retaliation. Section 922 of the Act “expressly prohibits retaliation by employers against whistleblowers,” providing them with “a private cause of action in case they are discharged or discriminated against by their employers,” according the SEC’s website.
Due to these provisions, the Dodd-Frank Act whistleblower programs have been wildly successful. Since 2010, the SEC and CFTC have recovered over $3.7 billion from wrongdoers and awarded more than $840 million to whistleblowers for their assistance. In Fiscal Year 2020 alone, the SEC received a record-breaking 6,900 whistleblower tips, coming from all 50 states as well as 78 countries outside of the United States.
While Dodd-Frank can already protect whistleblowers that report commodities or securities violations regarding illegally sourced or traded timber, as well as bribery under the FCPA, it is not well equipped to regulate trafficking, money laundering, and other related crimes occurring in the timber industry. The patchwork of other laws that exist to combat these crimes often are not strict enough or are poorly enforced. Thus, using Dodd-Frank as a blueprint for future whistleblower legislation can further extend crucial protections to whistleblowers raising concerns about the illegal timber trade around the world.
In order to empower whistleblowers to come forward, the National Whistleblower Center advocates for new legislation and legislative language that would adopt the successful approaches of Dodd-Frank. The award structure with a mandatory floor, its confidentiality protections, retaliation remedies, and avenues for protected disclosures all make Dodd-Frank ideal for reproduction in legislative aimed at combatting illegal trafficking in the timber industry – as well as trafficking in other wildlife, including animals and fish. When whistleblowers can step forward safely and report wrongdoing, we all benefit.