What can the UK learn from Canada and the US about whistleblower support?
It is important to recognize the critical role whistleblowers play in efforts to combat financial crime. However, while countries such as the United States and Canada have paved the way here, the United Kingdom has been slow to follow suit.
In recent years, both the United States and Canada have implemented successful models to incentivize whistleblowers.
These models have proven instrumental in uncovering complex fraud schemes and recovering substantial assets for taxpayers. This approach stands in stark contrast to the U.K., where such initiatives remain notional and often met with skepticism.
Fraud constitutes 41% of all crime in England and Wales, costing the economy an estimated GBP 219 billion annually.
Nick Ephgrave, Director of the Serious Fraud Office (SFO), has been vocal in his support for adopting whistleblower reward programs. He argues that incentivizing individuals to come forward with credible information can accelerate investigations, cut through data complexities and deliver justice more swiftly to victims.
Why the U.K. is Losing Whistleblower Leads
Ephgrave’s advocacy for a government consultation on whistleblower rewards is timely and necessary.
His agency’s ability to attract informants has waned over the years, with many opting to share intelligence with U.S. authorities due to the established reward systems there. This not only undermines British investigations but also diminishes potential recoveries that could benefit the U.K. economy.
The suggestion to introduce reward schemes for whistleblowers in the U.K. has sparked debate within legal circles.
Critics, particularly defense lawyers, express concerns about the reliability and persuasiveness of evidence provided by informants. Those critics fear that incentivized testimony may compromise the integrity of trials and unfairly sway juries. Yet, we should consider the position of the individual as well as the firm.
A recent study by Bloomsbury Square Employment Law revealed that a staggering 51% of U.K. employees did not feel safe or confident disclosing instances of misconduct, with 39% citing “fear of retaliation or bullying” as the primary deterrent to reporting breaches. Additionally, only 50% of employees surveyed were aware of their firm’s whistleblowing policy.
The Power of Incentives
In the U.S. and Canada, reward programs have not only enhanced the detection of fraud, they have also led to substantial financial recoveries.
The United States Securities and Exchange Commission (SEC), for instance, has disbursed millions of dollars in rewards to whistleblowers, underscoring the efficacy of such initiatives in stimulating actionable leads and dismantling sophisticated criminal networks.
Additionally, the Dodd-Frank Act of 2010 has created strong whistleblowing support for those brave enough to come forward. There are reward payments offered if sanctions of USD 1 million or more are imposed. The whistleblower can receive anywhere between 10%–30% of this fine.
The Canadian versions of the Dodd-Frank Act are similar in format, with the recovery needing to exceed CAD 100,000, which qualifies the informant for 5%–15% of the additional federal tax collected.
As it stands, a mere 5% of SFO cases in the U.K. have their derivation in whistleblower complaints. Conversely, 86% of penalties imposed by U.S. enforcement agencies originate from whistleblower leads.
“Nearly 100% of all whistleblowing cases that go to U.K. courts will fail,” according to data from Whistleblowers U.K., a whistleblowing organization. These statistics alone should act as the catalyst for change.
As the U.K. considers adopting new measures, it is crucial to address implementation challenges and mitigate potential drawbacks. Transparency in reward criteria, rigorous vetting processes and safeguards against frivolous claims are essential to maintain the credibility of informant-driven evidence.
Building a Modern Framework for Whistleblower Protection
Comprehensive legislative reforms are warranted to empower investigative agencies with the tools and resources necessary to effectively combat modern fraud schemes.
The review by Jonathan Fisher KC, a prominent barrister, on enhancing fraud detection capabilities and updating legislative frameworks, such as the Fraud Act 2006, is a step in the right direction. It highlights the need for adaptive legal mechanisms that keep pace with evolving criminal tactics and ensure robust judicial responses.
The U.K. stands at a pivotal juncture in its fight against financial crime. Embracing whistleblower reward schemes represents a paradigm shift towards proactive enforcement and greater accountability. By incentivizing individuals to expose wrongdoing, we not only strengthen our ability to prosecute offenders, but also deter future misconduct.
The transformative impact of whistleblower incentives is not just about financial rewards, but about upholding the principles of justice, protecting taxpayers’ interests and restoring public trust in regulatory oversight.
The time has come for the U.K. to heed the lessons from across the Atlantic and forge a path towards a more resilient and responsive anti-fraud framework. They seize the opportunity to empower whistleblowers, enhance investigative outcomes and safeguard financial integrity.
