Regulation  

Should the UK adopt a whistleblowing programme like the US?

Should the UK adopt a whistleblowing programme like the US?
 Photo by cottonbro from Pexels

Financial whistleblowers gained widespread attention last month when a former Deutsche Bank employee was awarded $200m (£146m) by a US regulator after raising concerns about Libor manipulation. The award was the largest ever made under the US whistleblower programme.

In the UK, the Financial Conduct Authority has also been busy.

In its Annual Report and Accounts for the year ending March 31 2021, the UK regulator said it had received 1,046 reports from whistleblowers, containing 2,754 separate allegations.   

Of those reports, the FCA took action to mitigate harm in 150 cases, and used the intelligence received to inform its work in 145 cases. Only 97 reports were not considered relevant to the prevention of harm and 654 cases were still being assessed at year end. 

The most frequently reported themes included compliance, fitness and propriety, treating customers fairly, data security, mis-selling and fraud – all clearly high on the agenda of a regulator whose aim is to improve the way the financial system works and how authorised companies conduct their business.

The FCA acknowledges that whistleblowers are a vital source of information and says that it wants to improve the process for those who contact the FCA. Indeed, in March of this year it launched its first external communications campaign 'In confidence, with confidence'. 

At the time, the FCA’s director of enforcement, Mark Steward, said: “When whistleblowing works well it helps consumers, markets and firms and keeps everyone safe and that is our aim.” 

In April 2019, it also published a high-level mission statement on its approach to enforcement.

Perhaps self-evidently, the FCA said that improved detection of misconduct increased public confidence and sends the message that misconduct will be uncovered and dealt with. 

It noted that “we must increase the likelihood of detection in tandem with efficient investigations”. Citing the sources of intelligence and data relied upon, including market data and information from firms, consumers and public databases, information from whistleblowers was singled out as it “may give us the earliest indications of wrongdoing”. 

FCA slow to respond

Clearly, whistleblowers are a valuable source of real-time intelligence on misconduct in financial services. Of the reports made to the FCA, only a small number (less than 10 per cent) were irrelevant. 

However, almost two-thirds of the reports made that year were still being assessed at year end. This is a similar proportion to the previous year.  

In fact, there is no published data on the outcomes of those whistleblower reports that did not produce a measurable outcome in the financial year they were made.

So, a key question arises: if whistleblower reports have the potential to be so helpful, should anything be done to increase the speed at which they are dealt with?  

Interestingly, the FCA maintains that the number of pending reports does not constitute a backlog. In its guidance to whistleblowers, it states: “Assessing and acting on whistleblowing information can take time – it may also become part of our ongoing supervisory work with a specific firm.”