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When Eric Ben-Artzi joined Deutsche Bank AG in 2010 as a risk analyst in New York, he became concerned about what he felt were moves by the bank to overvalue billions of dollars worth of derivatives, many tied to Canadian asset-backed commercial paper.

Mr. Ben-Artzi, who has a doctorate in math, took his concerns to his bosses and when he didn't get the answers he'd hoped for he filed a whistleblower complaint with the U.S. Securities and Exchange Commission in 2011. The bank says it originally raised the issues and self-reported them to the SEC in 2010, prior to Mr. Ben-Artzi being hired, and that it continues to co-operate with the investigation. It let him go in late 2011 as part of a reorganization.

Now the former banker could potentially be awarded millions of dollars if his allegations, which the SEC is still investigating, prove to be correct.

When the U.S. Congress passed the Dodd-Frank Act in 2010, in an effort to prevent another banking debacle such as the subprime mortgage crisis, it included a provision to encourage whistleblowing. Whistleblowers whose information enables the SEC to levy a fine of at least $1-million (U.S.) could be eligible for an award equal to between 10 and 30 per cent of the amount of the fine. One whistleblower received $14-million last September for a tip.

The SEC's whistleblower program goes far beyond what exists in most countries, and the Ontario Securities Commission has spent three years quietly studying whether it should put in place a similar rule. So far, it hasn't made a decision. In the meantime, it's probably missing out on some valuable tips.

People of any nationality are eligible for whistleblower awards from the SEC, and in its last fiscal year the U.S. regulator received 62 whistleblower tips from within Canada. That's a small fraction of the 3,238 total tips it received, but Canadians were the second-highest foreign reporters after the British.

It's never easy to be a whistleblower, but it's especially difficult in the financial circles of Wall Street and Bay Street. The stakes are just too high.

Mr. Ben-Artzi has filed a wrongful dismissal suit against the bank to get his job back, alleging that he was unfairly dismissed. He's also been looking for work elsewhere and for now is working as an adjunct college professor.

"Like other banking whistleblowers, finding employment on Wall Street has been difficult for me," he said in a recent interview. "However, I believe there are companies out there sufficiently confident in the integrity of their operations to hire people like me."

As with Mr. Ben-Artzi, whistleblowers often have to spend countless hours with regulators explaining their allegations, and sometimes hire their own accountants and lawyers to back up their claims. That dissuades people from coming forward. Who wants to risk their career and then spend time and money arguing their case for years against a powerful institution?

Mr. Ben-Artzi's New York lawyer, Jordan Thomas, points to another deterrent; the "bystander effect." It's a psychological theory that basically says the higher the number of bystanders, the less likely it is that any one of them will step forward. It's hard for people to stick their neck out when they think something might be wrong – even more so when it looks like their boss or superiors are fine with it.

Mr. Thomas, a former SEC assistant director, has been urging other countries to adopt similar compensation for whistleblowers. "Whether we like it or not, money can motivate people to do the right thing and when it is coupled with robust employment protections and the ability to report anonymously it has the power to break the corruption cycle," he told British lawmakers.

Britain is not yet financially awarding whistleblowers. However, last week the Bank of England put in place new compensation rules for banks that say, among other things, that bankers could have their bonuses clawed back for up to seven years if they're found guilty of misconduct or taking too much risk. Canadian financial institutions have already been upping their use of deferred compensation and clawbacks. But it's not enough.

When it comes to cracking down on risky or outright fraudulent banking practices, the first step must be to uncover them – and to do it proactively, before they cause serious damage or bring an institution down. Whistleblowers are essential to that effort.

Bay Street is a relatively small and close-knit place, and that makes it hard to rock the boat. But who knows what would be uncovered if people had an incentive to do the right thing.

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