A new study by the University of Notre Dame and the prestigious Labaton Sucharow New York law firm has confirmed what financial whistleblowers have known for years based on personal experience. To an alarming degree, the financial industry is making obstruction of justice through covering up financial crime a condition of employment. The just-released May 2015 report shows clearly why the government needs to act on pending “anti-gag” legal petitions at the U.S. Securities and Exchange Commission (SEC) and the Department of Labor (DOL).

The Notre Dame findings are as significant as they are alarming. The study of 1223 U.S. and United Kingdom financial industry professionals found that 34 percent of employees earning $500,000 or more annually have personally witnessed wrongdoing in the workplace. The level of cynicism is increasing as well: 23 percent of total respondents believe their colleagues engage in illegal or unethical activity to gain an edge, almost double the 12 percent cynicism index from 2012. Thirty-two percent believe their bonus and compensation structures encourage those misdeeds.

For a whistleblower support organization, the most troubling finding is the ongoing extent of pervasive secrecy that sustains the illegality. Nearly one fifth of employees (16 percent) say that their company’s confidentiality policy bars reporting illegal or unethical activities directly to law enforcement. Twenty-five percent of executives making over $500,000 annually are obliged to conceal wrongdoing from law enforcement by their terms of employment.”

This places honest financial industry employees in a double bind. Concealing evidence could make them co-conspirators in felony crimes, and refusing to participate in government investigations could create liability for obstruction of justice. But acting as an honest citizen could mean termination, blacklisting and ruinous litigation.

A secret life of cheating is no way to run an economy. Even more fundamentally, the persistent gag orders are a direct assault on the rule of law. Virtually all whistleblower laws passed since 2002, which together now cover the entire financial industry, have an “anti-gag” clause that makes these job prerequisites null and void. Most employees, however, don’t know about the legislative restrictions, and the study reveals that firms routinely ignore the legal boundary. Further, the lack of lawful authority hasn’t stopped industry firms from filing frivolous and devastating lawsuits against employees who cross them. Unemployed whistleblowers often cannot afford to call these legal bluffs. Further, industry lawyers constantly seek ways around traditional anti-gag clauses, such as saying that employees must first disclose evidence to them before giving it to the government.

The SEC recently acted against one firm, KBR, due to its nondisclosure agreements. But after-the-fact, ad hoc legal responses will barely make a dent in this crime wave. Most firms will not even tell the SEC if they require their employees to sign secrecy agreements.

The Government Accountability Project, teaming up with Labaton at the SEC and the Zuckerman law firm for the Department of Labor enforcement of corporate whistleblower laws, has petitioned these agencies for systematic, proactive reform. The petitions seek to ban the distribution of these gags, not just their enforcement. The petitions seek accountability for filing punitive lawsuits against employees for violating gags, when it would be illegal to fire the same whistleblowers.

The study has some grounds for optimism. After the wave of new whistleblower laws, eyewitnesses to corporate financial crime have dropped from 26 percent to 22 percent since 2012. Financial whistleblowers can have a far greater impact, however, if the SEC and the DOL start cleaning up the thicket of nondisclosure rules that make it a company crime to defend the rule of law.

Read the report here.