How the FCA is tackling whistleblowing challenges

In the UK, the government defines whistleblowing as reporting certain types of wrongdoing. This will usually be something seen in the workplace, although this is not always the case. The malpractice that is disclosed has to be in the public interest i.e. it must affect others, such as the general public.

Many people may initially fear that highlighting a wrongdoing will be career damaging and leave them facing recriminations. However, whistleblowers in the UK are protected by law, and therefore should not be treated unfairly or dismissed because of the act of whistleblowing.

Through its whistleblowing rules, the Financial Conduct Authority (FCA) aims to encourage a culture where individuals feel able to confidentially raise concerns and challenge poor practice and behaviour without facing recrimination. 

Concerns can be raised at any time about an incident that happened in the past, is happening now, or it is believed will happen soon. A confidentiality clause (‘gagging clause’) in a settlement agreement is not valid where whistleblowing is involved. 

The focus on whistleblowing also ties in with the wider work the FCA is doing to address culture and ensuring firms and their staff are accountable for their actions.

Complaints that count as whistleblowing and are protected by law include:

• A criminal offence such as fraud
• A company is breaking the law
• A belief that someone is covering up a wrongdoing

What are the most common reports of wrongdoing from whistleblowers in financial services?

According to its most recent published statistics, the FCA managed and assessed 1,153 whistleblower reports, consisting of 2,983 allegations of wrongdoing. The reports covered a number of areas, but at the forefront of these were allegations relating to:

• Misselling
• Money laundering
• Fitness & propriety
• Non-financial misconduct
• Unauthorised business
• Pension liberation activity

The historical challenge to coming forward

Back in 2012, the Protect Whistleblowing Charity published its first Silence in the City (SITC) report, which looked at why whistleblowers had not raised concerns that came to light during the financial crash and LIBOR scandal. The second report looked at whether anything had changed since the introduction of the FCA Whistleblowing Rules in 2016. Looking at 352 cases of individuals from the financial services sector who contacted the charities helpline from Jan 2017 – Dec 2019, it found that 31% were victimised or disciplined by management (a 9% increase since the first report), 30% said no action was taken over reports, 22% were dismissed, 12% resigned, 4% were victimised by co-workers, and 1% were suspended.

The SITC report also provided some significant insight into how firms dealt with the reports made, with 33% of reporters saying their concerns were ignored by the firm and 14% of concerns were denied. The vast majority (75%) of whistleblowers said that they were provided with no feedback about the reports they had made, which the SITC report indicated was a failure by firms to embrace the spirit of the FCA Whistleblowing Rules.

A lack of confidence in the regime

The report’s findings clearly raised some real concerns over whether the whistleblowing regime was actually effective, and posed questions about whether whistleblowing reports related to money laundering concerns have not been made due to the lack of confidence potential whistleblowers had.

In June 2020, a female head of compliance in a London brokerage company won her unfair dismissal case and was awarded over £75,000. She claimed that her firm tried to use an unrelated issue to get rid of her when she had raised concerns over potential financial deals.

In 2015, a major bank was fined $15m by US regulators after its CEO attempted to unmask a whistleblower. The CEO was personally fined £642,430 by UK regulators and his bank bonus was cut by £500k.

Launch of the FCA's 'In Confidence, with Confidence' campaign

Against this backdrop, it was no surprise that the FCA recently launched its ‘In Confidence, With Confidence’ campaign. It’s aimed at encouraging those working in the Financial Services sector to report possible wrongdoing and reminding potential whistleblowers of the confidentiality protections that are in place.

To accompany the campaign’s launch, the FCA also provided a range of promotional materials such as employee leaflets and a series of posters for firms to share with their staff.

In addition, on its website, the FCA has provided a ‘digital toolkit’ for industry bodies and consumer groups to use in encouraging people to blow the whistle. This includes a brief explanatory video, a number of links to supporting content (e.g. ‘Deciding to speak to us’ and ‘How we protect your identity’) and an infographic illustrating the whistleblowing process.

Whistleblowers that report to the FCA will also have a dedicated case manager. They can meet with the FCA to discuss their concerns and can receive optional regular updates throughout the investigation.

Whistleblowing fits very neatly alongside the ‘Speak Up, Listen Up’ initiative which is a major factor in the FCA’s drive towards the promotion and maintenance of healthy culture within Financial Services, where ‘psychological safety’ is paramount. People who want to raise concerns about possible wrongdoing should be encouraged to and, in doing so, should be protected from reprisals.

It’s important to stress that the latest campaign is all about raising awareness and reminding people that whistleblowing is a viable option to call-out wrongdoing. No new rules have been created - not yet anyway; it’s also worth pointing out that the Prudential Regulation Authority’s (PRA) whistleblowing requirements mirror the FCA’s rules in relation to dual-regulated firms.

For certain firms such as deposit-takers with assets greater than £250 million, PRA-designated investment firms, insurers within the scope of Solvency II, the Society of Lloyd’s and managing agents, compliance with the regulators’ whistleblowing rules is a mandatory requirement. For others, the regulators expect voluntary adherence on the basis of ‘good practice’.

What are the existing whistleblowing rules and requirements for firms?

Existing rules require relevant firms to have in place internal whistleblowing arrangements that are able to handle all types of disclosure from all types of person. Internal procedures should:

• ensure the firm protects the confidentiality of whistleblowers, if the individual concerned asks for this;
• ensure the firm is able to handle disclosures from people who wish to remain anonymous;
• assess and escalate concerns raised by whistleblowers within the firm as appropriate, and, where this is justified, to the FCA, PRA (or an appropriate law enforcement agency);
• track the outcome of whistleblowing reports;
• provide feedback to whistleblowers, where appropriate;
• prepare and communicate written procedures (e.g. via employee handbooks);
• maintain appropriate records; and
• take all reasonable steps to ensure that no person under the firm’s control engages in victimisation of whistleblowers, and take appropriate measures against those responsible for any such victimisation.

What role does staff training play in helping embed a culture that accepts reporting of wrongdoing?

Staff training plays a vital role in the process of embedding and maintaining robust and effective whistleblowing arrangements. All employees should be trained on the need to report instances of actual, or suspected, wrongdoing and the methods for doing so. This training should be underpinned with examples of events that might prompt a report and action that might be taken.

The regulators’ commitment to whistleblowing is also amply demonstrated by the fact that dual-regulated firms must allocate, to a Senior Manager, the ‘prescribed responsibility’ for overseeing their whistleblowing policies and procedures. This person is referred to as the ‘Whistleblowers’ Champion’.

Whether a person chooses to whistleblow via the firm’s internal escalation process, or go directly to the regulator, the ‘In confidence, with confidence’ campaign should serve to reassure them that the laws and regulations ensure that they should be listened to and protected accordingly.

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