124824104Preventing fraud is getting expensive. Or lucrative. It all depends on your point of view.

If you have evidence of fraud at your company and you’re willing to speak up, the SEC will make it worth your while. The agency proved as much recently when it paid out its first “whistleblower” reward to a source whose information helped the agency thwart a multi-million-dollar securities fraud.

The size of the reward: $50,000. That’s 30 percent of the amount the SEC collected from the fraudsters — the maximum percentage allowed under the new whistleblower provisions of the Dodd-Frank Act of 2010.

There are two schools of thought here.

The first, raised by the Institute of Internal Auditors, is this: By paying such huge rewards, the SEC is encouraging anyone who suspects fraud at their company to bypass the usual internal channels and go straight to the feds.

“We're concerned this could have a chilling effect, and this might become the preferred avenue for employees,” IIA President and CEO Richard Chambers told CFO.com. “… I am concerned that the allure of rewards will cause whistleblowers to automatically take matters outside of the company, thereby slowing down the fraud investigative and resolution process.”

The second school of thought is this: Who cares how fraud gets stopped, as long as it gets stopped? If the SEC has to cut a check to shut down fraud, so be it. Besides, it’s not like they’re just tossing random bags of cash out the windows down on F Street. The SEC actually has to prove that fraud has been committed and bring enforcement action against the guilty parties before they pay the whistleblower(s). Consider this quote from the SEC’s press release:

The SEC did not approve a claim from a second individual seeking an award in this matter because the information provided did not lead to or significantly contribute to the SEC’s enforcement action, as required for an award.

Me? I’m thinking this might be an opportunity for businesses to shore up their own internal oversight and make their organizations as transparent, open and accommodating as possible for anyone with concerns about possible fraud.

Fraud expert Chris Giovino thinks so, too. As CFO.com’s Caroline McDonald writes, Giovino “believes the whistleblower program will have a positive impact, and gives organizations more incentive to do a good job. He notes, however, that the burden is now on companies to make sure their employees are comfortable coming forward and confident the company will take appropriate action.”

Thanks to the SEC, there’s more incentive to do so now than ever.

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