Achieving full-cycle anonymity for whistleblowers by paying the reward in crypto

Romania leads most European Union (EU) nations in the adoption of the EU Whistleblower Directive with strong support of Minister of Justice, Stelian Ion, and Member of Parliament, Sebastian Burduja, who attracted the assistance of numerous whistleblower experts from both the United States and Europe. This week, they continued to demonstrate their undeterred interest for a smooth implementation of the directive to include anonymity, protection and rewards by participating at the 18th edition of the Tax, Law, and Lobby: Whistleblower Focus Conference.

The conference was held on April 20th and it was organized by Business Review, the oldest English-language media platform in Romania since 1998. The stellar line-up of 29 international speakers shared their expertise with an audience of 3,100, who participated virtually from a dozen countries.

The main topic of the conference was the legislative adoption into Romanian law of EU Whistleblower Directive (2019/1937) of the European Parliament and of the European Council. All EU countries have until December 17th of this year to adopt this Directive or they will face a 5,000 euro per day penalty. This Directive proposes certain protection measures for whistleblowers who decide to report violations of EU law, as well as a series of new measures based on models of good whistleblowing practices at the international level.

Among many important topics of discussions brought up by the 29 speakers was also a creative solution of providing whistleblowers “perfect anonymity” all the way through the phase when the reward is being paid out. The possible solution of paying the reward with a cryptocurrency such as Bitcoin, or a new cryptocurrency designed specifically for this purpose, was discussed in a fireside chat hosted by Mike Costache, a Romanian-American-Israeli entrepreneur and philanthropist, with George Rotariu, co-founder and CEO of BitCoinRomania (the oldest and largest crypto exchange and network of crypto ATMs in the region), and Sebastian Bodu, former head of ANAF (the Romanian equivalent of the U.S. Internal Revenue Services), who is currently serving as an advisor to Deputy Prime Minister Hunor Kelemen in the Romanian Government.

Watch the full Fireside Chat “Can blockchain be the ultimate solution for providing anonymity to whistleblowers if the reward is paid in crypto?” with Mike Costache, George Rotariu, and Sebastian Bodu

The idea of helping Romania become a model country for properly adopting EU Whistleblowing Directive 2019/1937 was born three years ago

Development on this law kicked into high gear in November 2020, when Mike Costache, Bogdan Buta, currently a Managing Associate at DLA Piper Romania, and Bradley Birkenfeld, the most famous whistleblower in financial history, with $104 million reward by IRS in 2012, decided to form a working group.

The first person they invited to join was non-other than the most well-know whistleblower lawyer and activist, Stephen M. Kohn, who is the Board Chair of the National Whistleblower Center (NWC) and runs his own law firm in Washington DC with a staff of 10 lawyers whose caseload of 120 current cases includes 40% that are done on a pro bono basis.

Costache and Birkenfeld were discussing the idea of creating such a working group ever since they first met, back in May of 2018 in Malta, when Birkendfeld was the opening keynote speaker at the 22nd global edition of d10e, a leading conference on decentralization chaired by Costache.

Romanian Blockchain Summit

Having learned that Brad’s grandfather was born in Romania (emigrated to the US in 1922) and that the proceeds of his book, Lucifer’s Banker, are donated to a local Romanian charity, Costache invited Birkenfeld on June 22nd, 2020 to speak at the Romanian Blockchain Summit, which was held inside the Parliament Palace.

On the same day, Brad was invited to speak in front of 200 senior executives working for local offices of Deutsche Bank. Throughout the pandemic year of 2020, Birkenfeld continued to donate his time and expertise by speaking at three more conferences (held virtually) which focused on whistleblower legislation and anti-money laundering issues: on October 14th organized by the Law Offices of Dentons, on November 19th organized by Syene Center for Education and on December 9th organized by the Law Offices of Noerr.

On January 27, 2021, the research put together by Birkenfeld, Buta and Costache was presented to Member of Parliament Burduja and his Political Advisor, Cristian Dorobantu. Within less than a month of close collaboration, their draft law was ready and thus Romania became the first EU country to incorporate into the EU Whistleblower Directive all the vital feedback related to whistleblowers’ protection and rewards as explained by the National Whistleblower Center in its July 2018 letter, addressed to the then presidents of the European Commission and the European Parliament.

On March 5th, the Ministry of Justice published their enhanced version of the EU Directive and on April 1st Parliamentary Member Burduja put into public debate the group’s proposed law while on the same day the Ministry of Justice scheduled a public debate for April 8th.

A common platform

Having a common platform to voice everyone’s opinions about the proposed law, all interested parties mentioned above joined forces on April 8, together with Transparency International Romania, Syene Center for Education, REPER for Values-Based Management, American Chamber of Commerce in Romania (AmCham), Center for Advanced Research in Management and Applied Ethics (CARMAE), Sustainability Embassy and Romanian’s Agency of National Integrity (ANI), as well as representatives from private sector companies such as Ernst & Young, OMV Petrom, Law Offices of Maravela, Popescu & Asociatii and Roche Romania.

Everyone’s written feedback was compiled into a document containing 161 pages which is currently being reviewed by Mihai Pasca, State Secretary at the Ministry of Justice (who moderated the public debate), Silvia Tabusca, Personal Advisor to the Minister of Justice, Ana-Maria Barladeanu, Ana-Maria Neamtu and Adrian Dumitru from the Normative Acts Elaboration Department (DEAN), by Carmen Necula of the European Affairs & Human Rights Directorate (DAEDO) and Ana-Lorena Sava of the Crime Prevention Directorate (DPC). Their hard work will be revealed in the coming weeks, and in the second part of May the proposed law should be ready to be submitted to the Legal Commission of the Romanian Parliament.

“In 2004, Romania became the first country in Continental Europe to pass a law for whistleblowers, but only as related to public sector employees. Unfortunately, the law has had almost no effect since it did not covered the three important aspects whistleblowers require, namely: anonymity, protection and rewards,” said Costache.

Romanian Law 517/2004, made only for public servants, didn’t work because it didn’t provide anonymity and the whistleblower was not offered adequate protection in any way. This old law is now being changed with the new law that everyone is currently working on in order to make sure that it has a real effect this time around, over 15 years later.

The 5th Anti-Money Laundering Directive (also known as AML5 or 5AMLD) was entered into force on July 9, 2018 and was then implemented into the national legislation by all member states by January 10, 2020. This new legislation is meant to fight against money laundering and terrorist financing and thus requires all transactions to be transparent. In discussing the idea of offering anonymous protection to the whistleblower by making the reward in cryptocurrency, which derogates from the provisions of AML5, Bodu’s answered:

“According to the Anti Money Laundering law, all cryptocurrency transactions must be made transparent and there is no anonymity, and it is one of the reasons that will allow us to oblige the platforms to identify all the participants in transactions. I think this should be addressed by amending Law 129 of 2019. This is the law in which we transposed the 5th Anti Money Laundering Directive, but we did not address this part so I think it should be an amendment, because otherwise it does not work. On one hand, it should be anonymous, and on the other hand, it should be transparent.”

When asked how we can address the issue of maintaining anonymity for whistleblowers from the public sector who are required to disclose their net worth and all income source, Bodu commented:

“We must address all these problems to keep the whistleblower reward away from any public wealth declarations. In Romania, public sector employees are required to publicly declare their entire networth and all sources of income. So, when we put this legislation in place we must make sure we cover all these important aspects.”

One of the ways to do that is by using cryptocurrency, maybe by creating a new one, specific to be used as a reward token or coin, two terms that are used interchangeably when discussing crypto payments. During the fireside chat, Rotariu was asked if he foresees whistleblowing rewards being paid out in the near future in crypto. His reply was:

“I am sure there will be a cryptocurrency for this in the future. There are important projects already ongoing, and given the fact that blockchain is a great technology in terms of anonymity, I am sure that one of these projects will flourish,” adding that using a cryptocurrency makes sense, since it can be kept out of the wealth declaration required by the law for public servants.

Rotariu further added:

“I am pretty sure that the main cryptocurrency, Bitcoin, can be used to reward whistleblowers because it already has a global infrastructure, and we all know that the personal wallets are not nominal. So, before someone changes of bitcoins in fiat currency, there is perfect anonymity for the person who received the reward in bitcoin. I believe that this is a very good alternative until a very serious project, a global project will come up.”

EthicWhispers, a whistleblower cryptocurrency

In closing the fireside chat, Costache mentioned that an interesting example of a whistleblower-specific cryptocurrency is being worked on by a group of entrepreneurs based in Rome, Italy. EthicWhispers was started in 2018 and the blockchain-based legaltech venture is a revolutionary concept of a social enterprise where whistleblowers are rewarded for their social activity for the good of society while maintaining their anonymity and while leveraging the peer-to-peer communication of whistleblower networks.

EthicWhispers enables whistleblowers to report malpractices and financial crimes and assists with the entire process, all the way to the point when the whistleblower is offered a reward from various governmental whistleblower reward programs, such as the US Internal Revenue Service (IRS), Securities Exchange Commission (SEC), Commodity Futures Trading Commission (CFTC) or the False Claims Act of 1986.

EthicWhispers has created the “ETHIC” cryptocurrency token, a full zk-SNARKs anonymous token. Zero-Knowledge proof technologies, like zk-SNARKs, are very common in privacy blockchain cryptocurrencies (privacy coins) where one can prove possession of certain information (e.g. a secret key) without revealing that information, and without any interaction between the prover and verifier. These transactions permit full anonymity of both recipients and senders addresses as well as the amounts.

The main purpose of EthicWhispers is to reduce corruption in the society, improve the environment, allow people to monetize their contribution and offer them protection from facing stiff reprisal and retaliation.

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