The EU’s Whistleblowing Directive is now in effect. Although not yet implemented by all Member States, businesses 1with operations in Europe should now be aware of, and taking proactive steps to address, the new requirements. These include establishing internal reporting channels, protecting the confidentiality of whistleblowers and ensuring that employees who make whistleblowing reports are protected against any form of retaliation.
There are presently no proposals to bring mirror provisions into UK domestic law, although two private members’ bills on this topic were presented to Parliament in early 2020. Nevertheless, many UK headquartered or UK based organisations with European and international footprints have decided to follow the requirements of the Whistleblowing Directive, in order to take a consistent and integrated approach to their whistleblowing processes across all of their operations, irrespective of location.
It is reported that 19% of frauds in private corporations are exposed by professional auditors, whilst over double that number 2are exposed by whistle-blowers3. A supportive “Speak Up” culture is clearly of benefit to both an organisation and its employees.
So what are the hallmarks of an effective whistle-blowing regime?
Embed an open speak up culture
Employees and other third parties with whom you work should feel confident in the culture of the organisation to do the right thing. Company cultures which encourage accountability deter wrong-doing and reassure employees that any concerns raised will be taken seriously. This, in turn, is likely to make employees more confident to raise concerns through internal channels.
Clear and confidential lines of communication
A whistle-blower report is your early warning signal to identify, investigate and remediate any actual or potential wrong-doing within your organisation. An organisation should make it simple and efficient for an individual to report concerns or breaches of your organisation’s rules, via a system that preserves the whistleblower’s confidentiality. Whistleblowing hotlines should be prominent and reporting mechanisms highly visible.
Review and investigation by an impartial department
Offering an alternative reporting structure to speaking with a manager allows for greater integrity of your whistleblowing processes. It allows employees or third parties to report their concerns surrounding the conduct of any individual within the company, irrespective of seniority. The Whistleblowing Directive makes clear that an impartial person or department should be designated to follow-up on whistleblowing reports.
Dialogue with the whistle-blower
Maintaining a dialogue with the whistle-blower fosters a culture of trust. Whilst it may not always be appropriate to publicise the outcome of any whistleblowing investigation, being clear with the reporter about timeframes for the investigation, any requests for them to provide documents or further information, and - depending on the complaint and any subsequent findings - measures or remediation steps taken as a consequence of their report ensures that whistle-blowers understand that their concerns are taken seriously and that their reports are valued.
Are you regulated?
The Financial Conduct Authority (“FCA”) requires relevant firms to put in place internal arrangements for the disclosure of reportable concerns by whistleblowers. These arrangements should be capable of receiving confidential and anonymous disclosures and should include reasonable measures to prevent victimisation of whistleblowers. A report should be made at least annually to the board on the operation and effectiveness of the firm’s systems and controls in relation to whistleblowing, and certain firms are required to appoint a whistleblowers’ champion. Firms are also obliged to tell their UK-based employees of their ability to report concerns directly to the regulator. In April 2021, FCA also launched a campaign entitled "In confidence, with confidence" which encourages those working in financial services to report potential wrongdoing to the FCA.
For any further support or guidance on your whistleblowing policies and processes, please contact our White Collar Crime and Compliance experts.
Authored by Arwen Handley and Olga Tocewicz.