Hi Erich, I enjoyed this post and have been publishing closely related research on this topic. As I document in a forthcoming article in the Berkeley Business Law Journal, empirical evidence overwhelmingly suggests incentivization programs are highly effective. Even more impressive than the SEC's program is the False Claims Act. I performed an analysis of the FCA from 1986 onwards, finding that the U.S government paid whistleblowers $13 billion in return for $76 billion in successful settlements and judgments (ROI of 486%).
But I actually think we can go further. In the article, I advocate for a new program in which Licensed Detection Agents, or LDAs, are empowered to monitor transactional data and financially rewarded for reporting suspicious activity. This program would effectively professionalize whistleblowing, removing the substantial burden it places on individuals to secretly report illicit activity.
I'd missed that article of yours but it looks really interesting; I'll have a look. It's actually similar to a working paper we're writing, on independent third-party export auditors!
Yeah, I agree this is a potential concern, but a surmountable one.
There is an arbitration process for BIS penalties, and in theory companies can appeal a fine to federal courts, which could serve as a check against BIS spuriously fining companies to generate income. In practice, though, this rarely happens, I think partly because BIS can suspend export rights during the appeals process, and partly because federal courts tend to defer to BIS. Usually companies and BIS settle.
As currently written, the SSOCA would allow BIS to spend penalties generated by whistleblower tips on rewards, on the whistleblower program, and on enforcement generally. It may make sense to amend the bill so that BIS can spend only on rewards and on the whistleblower program. Allowing BIS to spend on the core functions of the program would not, I think, create major incentive issues, as the cost of running the program is small enough, and the baseline rate of penalties is large enough, that on the margin BIS would rarely or never have the opportunity to administer an unjust fine to enrich itself. Most years there would likely be a surplus that BIS cannot spend and that would go to the Treasury.
Hi, thx for engaging. I'll try to reply in reasonable time, though I am just now mentally drained from my fighting-email-flood-dayjob, so emphasis on try
Hi Erich, I enjoyed this post and have been publishing closely related research on this topic. As I document in a forthcoming article in the Berkeley Business Law Journal, empirical evidence overwhelmingly suggests incentivization programs are highly effective. Even more impressive than the SEC's program is the False Claims Act. I performed an analysis of the FCA from 1986 onwards, finding that the U.S government paid whistleblowers $13 billion in return for $76 billion in successful settlements and judgments (ROI of 486%).
But I actually think we can go further. In the article, I advocate for a new program in which Licensed Detection Agents, or LDAs, are empowered to monitor transactional data and financially rewarded for reporting suspicious activity. This program would effectively professionalize whistleblowing, removing the substantial burden it places on individuals to secretly report illicit activity.
Here is a link to the article: https://papers.ssrn.com/sol3/papers.cfm?abstract_id=5106992
And I recently summarized the proposal in a substack: https://mileskellerman.substack.com/p/financial-crime-bounty-hunters
You might also enjoy another post of mine on the possibility of tracking export control violations not through whistleblowing but rather tracking devices: https://mileskellerman.substack.com/p/this-chip-will-self-destruct
Thanks, Miles! I'm definitely familiar with the False Claims Act, and that was one of the models we mentioned in this report: https://www.cnas.org/publications/reports/countering-ai-chip-smuggling-has-become-a-national-security-priority
I'd missed that article of yours but it looks really interesting; I'll have a look. It's actually similar to a working paper we're writing, on independent third-party export auditors!
The working paper sounds fascinating, I look forward to reading!
Letting the agency use the money from fines seems to provide dangerous incentives.
Yeah, I agree this is a potential concern, but a surmountable one.
There is an arbitration process for BIS penalties, and in theory companies can appeal a fine to federal courts, which could serve as a check against BIS spuriously fining companies to generate income. In practice, though, this rarely happens, I think partly because BIS can suspend export rights during the appeals process, and partly because federal courts tend to defer to BIS. Usually companies and BIS settle.
As currently written, the SSOCA would allow BIS to spend penalties generated by whistleblower tips on rewards, on the whistleblower program, and on enforcement generally. It may make sense to amend the bill so that BIS can spend only on rewards and on the whistleblower program. Allowing BIS to spend on the core functions of the program would not, I think, create major incentive issues, as the cost of running the program is small enough, and the baseline rate of penalties is large enough, that on the margin BIS would rarely or never have the opportunity to administer an unjust fine to enrich itself. Most years there would likely be a surplus that BIS cannot spend and that would go to the Treasury.
Well documented and valuable. Thank you.
I am late to this, but have you considered the possibility that chip controls are bad, actually? I made a half hearted quick take laying out the case here: https://forum.effectivealtruism.org/posts/fPb9W5gQcQ2LD5qDi/alesziegler-s-quick-takes?commentId=2GGwjFf9kt55rkurc
Thanks! I replied here: https://forum.effectivealtruism.org/posts/fPb9W5gQcQ2LD5qDi/alesziegler-s-quick-takes?commentId=d8CDBR4DvhNrpuMGy
Hi, thx for engaging. I'll try to reply in reasonable time, though I am just now mentally drained from my fighting-email-flood-dayjob, so emphasis on try
All good