Perspective

26 Jul 2024

7 minute read

Around the world in 80 ways: a tour of global whistleblowing regimes

Authors:

Ian Hughes

Chris Watt

Whistleblowing remains one of the most powerful tools organisations can deploy against fraud and misconduct – according to the Association of Certified Fraud Examiners¹, tip-offs account for 43% of all fraud detected – but protections in the UK have been largely unchanged since the Public Interest Disclosure Act 1998 (“PIDA”)².

A few years ago, it looked like big moves were afoot. In the spring of 2021, the Government had committed to a new review³ of the whistleblowing framework, the House of Lords was making positive noises about an Office of the Whistleblower⁴ and the UK looked set for its first major shake-up of whistleblowing protections in decades. A public consultation⁵ was launched in 2023 but, at the time of writing, has yet to publish any conclusions.

So with a new Government in power, we ask: is it time for a fresh look at the UK whistleblowing regime?

In this article, the latest in a series, we highlight some recent trends and developments in global whistleblowing and suggest learning points the UK could consider in improving its own whistleblowing environment.

If the new administration needs inspiration it could look across the Atlantic, where headline-grabbing reward schemes have coincided with a surge of interest in whistleblowing and high-profile cases like the ongoing Boeing saga⁶.

In 2011 the US Dodd-Frank Act⁷ introduced cash rewards for information leading to SEC sanctions over $1 million, netting whistleblowers between 10% and 30% of the sums collected by authorities. A patchwork of complementary laws, including the False Claims Act⁸, the Commodity Futures Trading Commission whistleblower programme⁹ and the IRS Whistleblower Law¹⁰, have further bolstered the rewards regime, and last year one whistleblower alone was awarded almost $279 million by the SEC¹¹.

Canada has similar reward programmes, though far lower in value¹². The Canadian Revenue Agency (“CRA”) launched an incentive scheme in 2014 to track down tax cheats, and the Ontario Securities Commission (“OSC”) introduced its whistleblower programme in 2016. The CRA has since paid out over $1 million in rewards, and the OSC more than $10 million.

The UK actually has some small-scale reward programmes of its own, though less publicised than their North American equivalents. In 2017 the Competition and Markets Authority (“CMA”) began paying for information on illegal cartels, and in 2023 it increased the maximum reward to £250,000¹³. HMRC also makes payments to informants¹⁴, typically amounting to several hundred thousand pounds per year, though it does not publicise these payments (figures come to light through the National Audit Office’s reporting on HMRC expenditure¹⁵).

No cash, please, we’re British

Westminster has considered the US model in the past but generally resisted calls for bigger rewards. In 2014 the FCA and PRA researched the potential impact of a US-style scheme in the UK and reported to a Treasury Select Committee¹⁶ that “introducing financial incentives for whistleblowers would be unlikely to increase the number or quality of the disclosures we receive from them”.

Limited evidence in the UK appeared to bear that out: the CMA introduced its incentive scheme for anti-cartel whistleblowers in 2017 but in the first six years of the programme it saw a 70% drop in reports¹⁷. Rather than scrapping the scheme, however, it chose to double down and in 2023 it increased the maximum reward from £100,000 to £250,000. It’s too early to say whether the higher cap will lead to an upturn in reports – we await the data with interest – but the decision to increase payouts appeared to be a vote of confidence in the incentive principle and may indicate a shift in opinion since the FCA and PRA reported on the issue in 2014.

A recent study in the US made a positive case for incentive programmes. The 2021 paper¹⁸, by researchers at Harvard Business School, concluded that “greater incentives increase the number of lawsuits filed with the regulator, the regulator’s investigation length, the percentage of intervened lawsuits, and the percentage of settled lawsuits”.

So are reward schemes a silver bullet? Unfortunately not.

The whistleblowing charity Protect has raised two main concerns about reward schemes: that they create perverse incentives for whistleblowers to let issues escalate in the hope of larger fines (and thereby larger rewards); and that incentives typically focus on financial crime while doing little to address non-monetary problems such as abuse¹⁹. Protect has also warned that incentive schemes are vulnerable to “capture” by law firms, which eat up a portion of rewards through fees while helping whistleblowers build their cases²⁰. In 2023 the Wall Street Journal reported a study that found nearly a quarter of SEC whistleblower payments had gone to a small group of “well-connected” law firms²¹.

On the other hand, a whistleblowing incentive scheme could be created at minimal cost to the UK taxpayer. With public finances already overstretched, legislators here could learn from the US, South Korea and other jurisdictions, where rewards are paid from fines or funds recovered²². If the UK does choose to go down the cash rewards route – and assuming regulators have sufficient resources to run more investigations effectively – the system could ultimately be self-financing, with fines exceeding the costs of investigation and enforcement of cases.

Know EUr rights

The US has hogged the headlines with the size of its incentives but closer to home the EU has finally completed the roll-out of its Whistleblower Directive (“the Directive”). Introduced in 2019, with the goal of evening out the whistleblowing landscape and creating a minimum level of protection across member states, it was only in June 2024 that the Directive was finally enacted in all jurisdictions²³.

It’s too early to say whether the implementation will be a success but in this increasingly globalised world anything that standardises process and protections across borders must be welcome.

If the UK is serious about improving its domestic whistleblowing environment, it should consider harmonising it with global peers to streamline reporting processes and provide clarity over whistleblowers’ rights in a wide range of circumstances. Over the coming years, EU members’ divergent approaches in implementing the Directive will provide a wealth of real-life examples to show what does and doesn’t work.

The Directive has already enjoyed some success in Slovakia, where the Government backed down from a bid to reduce penalties for economic crime and remove protections²⁴ amid claims it would breach EU rules and threaten funding from Brussels²⁵.

Whistling in the wind

While European and North American states have taken great strides in their whistleblowing regimes, the UK can at least take heart that it’s not the last place to get its act together. Switzerland, outside the EU, has no state-wide law to protect whistleblowers. National legislators rejected several attempts to introduce one between 2003 and 2020, though individual cantons (including Geneva) have some protections.

Other jurisdictions, like Hong Kong/China and Australia, have a patchwork of legislation – often under wider employment laws – but little by way of formalised whistleblower protections. India’s regime excludes the private sector²⁶, though others – including Japan, the UAE and South Africa – are waking up to the value of robust whistleblowing frameworks and taking steps to introduce protections for those who expose wrongdoing.

So what are the take-homes for the UK?

First, that there is much to learn from our international peers. Incentive schemes in the US are increasingly mature and offer valuable insights into what might be achievable here. The EU too offers grounds to be optimistic on cross-border harmonisation, though it also demonstrates the friction in implementing new rules. And while the UK is no longer in the EU, The EU Directive still has a direct impact on the many British companies that operate in member states.

Countries with effective whistleblowing regimes offer robust protections and incentives for whistleblowers to come forward, and for programmes to be successful they have to be widely publicised and trusted by the public.

Campaigners including trade unions, media commentators and politicians across the political spectrum have long called for greater protections in the UK, and groups such as Protect and Whistleblowers UK have campaigned on issues such as extending protections to a wider range of individuals; introducing standards for all employers; and improving access to justice as part of a broader national effort on whistleblowing²⁷.

If the UK could establish a dedicated Office of the Whistleblower, that would go some way to achieving these aims, or at least to providing a stable foundation and ownership for future improvements. We have much to learn from our international peers, and a huge opportunity to seize the initiative and make real, lasting improvements to our national whistleblowing regime.

For a confidential discussion on how these issues affect your organisation, or to find out more about Deloitte’s services (including our target operating model for whistleblowing), please contact Ian Hughes (iphughes@deloitte.co.uk) or Chris Watt (cwatt@deloitte.co.uk).

With thanks to Deloitte Forensic manager Abida Siddiqua for research.

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Around the world in 80 ways: a tour of global whistleblowing regimes

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Around the world in 80 ways: a tour of global whistleblowing regimes

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Ian Hughes

Chris Watt

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