Founder and CEO of Risk Smart Inc.
Whistleblowers across the European Union (EU) have won greater protection under landmark legislation aimed at encouraging reports of wrongdoing. According to the BBC, “The new law, approved by the European Parliament, shields whistleblowers from retaliation” and creates "safe channels" to allow them to report breaches of EU law. It is the first-time whistleblowers have been given EU-wide protection.
Also under the new law, “If no appropriate action is taken or in cases where reporting to the authorities would not work, whistleblowers are permitted to make a public disclosure — including speaking to the media.” The law “protects whistleblowers against dismissal, demotion and other forms of punishment. National authorities are required to train officials in how to deal with whistleblowers under the legislation.
If member states fail to properly implement the law, the European Commission can take formal disciplinary steps against the country and could ultimately refer the case to the European Court of Justice.
Whistleblowing in practice
Whistleblowing should be an essential component of strong corporate governance and should be embraced at the top of an organization. It exposes and shines light on wrongdoing and bad culture. However, far too few boards see it as a reflection on them and as an unnecessary evil that provokes an outcrying of emotion rather than objectivity.
There is a target-rich environment, as many firms, especially in the U.S., have been taken to task over their culture. Some rewards are simply enormous. For example, “Two whistleblowers received a total of $50 million for providing information that helped the Securities and Exchange Commission pursue a case of corporate wrongdoing against JP Morgan Chase,” the SEC said last month. Given that this is between 10-30% of the total proceeds, the SEC walked away with a substantial tax-free amount.
The SEC whistleblower program received a record 5,282 tips during 2018, an increase of 18% from a year earlier, according to a report submitted by the securities regulator to U.S. Congress. Tips have nearly doubled since 2012. I remember a pertinent fact that when studying for the CFE Exam that around that 40% of all fraud investigations are derived from tips, according to the ACFE’s most recent Report to the Nations.
The increase in tips has put the onus on whistleblowers and their attorneys to present better evidence of their claims at the outset, since the regulators, given their limited resources, only investigate the most robust and profitable cases.
If regulatory agencies begin talking to each other and are willing to share the rewards, and upsize their surveillance with the latest technology, the fines alone would probably pay for the organization budgets. With an abundance of riches, prescient regulatory agencies and enhanced protection, there seems to be no better time to be a whistleblower.
John Thackeray is the founder and CEO of Risk Smart Inc., a consulting firm that specializes in the writing of risk documentation. Over his long career, he has held many risk positions, including CRO posts at Societe General and Penson Worldwide Holdings, where he interacted and engaged with U.S. and European regulators.