Barings Bank’s collapse, the Zeebrugge ferry disaster and the Piper Alpha oil rig explosion – it took a series of scandals and fatal tragedies for the government to finally develop regulation in 1998 to protect whistleblowers: the Public Interest Disclosure Act (PIDA).
To receive protection under the act, whistleblowers must make ‘qualified disclosures’ that are in the public interest; a complex and fact-dependent test.
These must show concerns about breaches of civil, criminal, regulatory or administrative law, miscarriages of justice, dangers to health, safety and environment, and a cover-up of misconduct.
“The one in financial services that we rely on is that the person believes there has been a failure to comply with the legal obligations,” says Clive Howard, an employment lawyer at Slater and Gordon. It is essential to demonstrate a breach of law, not just company policy.
“The problem people face is showing a breach of a legal obligation. Often in financial services, the whistleblower’s focus tends to be on internal rules operated by the bank, such as a failure to document trades or do them in a certain way.”
This is something of a grey area, as often an employer will argue its own internal rules are in line with the Financial Conduct Authority’s (FCA) requirements, but they are not legal rules.
Typically, the best outcome in the event of a dispute is for employees and employers alike to settle. It can be costly and risky for an employee to go to an employment tribunal, not to mention difficult to prove that any adverse treatment suffered is due to blowing the whistle. Employers don’t want the bad publicity.
Howard says: “Banks will often settle because they don’t want to have a public hearing where messy issues are thrashed out in an arena which can be widely reported on.”
The reality is that only 4% of whistleblower claims prove to be successful at employment tribunal, according to government statistics, meaning settlement is the smartest option.
Many financial institutions model their whistleblowing policy on a template developed by charity Public Concern at Work (PCAW). PCAW gets around 2,500 calls to its advice line every year, of which approximately 8% are from people in financial services.
The biggest areas of concern are about financial malpractice – governance and financial mismanagement – and working practices, which includes bullying, harassment and discrimination.
There was a surge in calls from people in financial services about sexual misconduct towards the end of last year, says Francesca West, CEO of PCAW.
“All the [Harvey] Weinstein [coverage] showed people what inappropriate conduct was and that it was okay to question it,” she says.
PCAW is partly funded by banks, as it offers a whistleblowing training service to companies. It has previously trained 12 financial institutions, including Barclays, Royal Bank of Scotland, Lloyds and Santander.
FCA’s whistleblowing champions
Since September 2016, British banks have been required to appoint a whistleblowing champion, a person that employees can raise their concerns with directly, under the FCA’s senior managers and certification regime. It remains to be seen how effective this set-up is; whistleblowing experts are divided.
The FCA’s own figures show that the number of whistleblowing cases it opened fell two years in a row, from 1,360 in 2014 to 1,105 in 2015, and down to 866 in 2016. There were 793 cases for the first nine months of 2017.
The concept looks good on paper, says West, but it can take time for these initiatives to embed and for people to trust them.
“I think this year will be a seminal moment on it,” she says. “Either you start to see more people feel they can raise things internally or you see institutions fail to take whistleblowers seriously.”
Barclays came under fire after it emerged that CEO Jes Staley tried to unmask a whistleblower in 2016, breaching the bank’s rules. The FCA has already delayed its investigation into Staley twice, prompting criticism.
Georgina Halford-Hall is the CEO of charity WhistleblowersUK (WBUK), which is funded purely by donations, and works with whistleblowers in financial services. It doesn’t have any confidence in any of the champion input it has seen so far.
“We are very sceptical about the role of the champion when they are employed by the bank,” says Halford-Hall. “It is no different to national guardians. Many of the people recruited to be champions come from management, not a whistleblowing background.
“A senior employee at the FCA said to me it’s about as useful as a chocolate frying pan. I have some sympathy.”
Whistleblowing champions are often non-executive directors that might only work one day a week or a few days a month, says one industry expert.
National whistleblower office
Experts are calling for better whistleblowing laws in the UK. WBUK is meeting with the government, with the support of the Institute of Business Ethics and PCAW, to put forward its proposal for a bill amendment of PIDA, to include an Office for the Whistleblower.
It has the support of Baroness Kramer and Lord Cromwell, as well as MPs and thought leaders.
Halford-Hall says: “I think whistleblowing is an area where law lords and government are becoming increasingly interested in light of the harassment issues highlighted in government, the ‘#metoo’ campaign, RBS, Lloyds/HBOS, Grenfell Tower, Carillion, the breakdown of the justice system in light of failures by police to disclose information and many more.”
Industry experts describe PIDA as “complicated”, “dated” and “not particularly effective”.
PCAW’s West says: “It’s in need of review. No law can stand the test of time.”
Whistleblowing legislation originated in the UK, but today it falls behind other countries such as the US, which offers anonymity and bounty payments.
Jonathan Cox, a whistleblowing specialist consultant at JJ Cox consultancy firm, says: “Personally, I think it’s time to consider bounty payments.”
“At least in the US, if you expose something you will be compensated, because the chances are you will never work again,” he adds. “Whistleblowers have nothing to be gained and everything to be lost.”
However, there are steps potential whistleblowers can take to protect themselves.
WBUK’s Halford-Hall recommends calling the organization before bringing up any potential reportable issues to a line manager.
“Sometimes people are not clear about what whistleblowing really is,” she says, and the organization can pair callers up with experienced whistleblowers.
Reading and understanding an employing company’s employee handbook, whistleblowing policy and one’s own contract are critical to understanding one’s contractual, legal and regulatory obligations, as well.
Halford-Hall says: “I know of one compliance officer fined by the FCA for making a disclosure to the wrong whistleblowing hotline.”
A company’s whistleblowing policy might not satisfy legal policy.
Foreign exchange trader Paul Carlier says he followed his bank’s policy when he blew the whistle, but when he took his unfair dismissal case to an employment tribunal, the judge ruled that his disclosures were not protected in the eyes of the law.
The judge only upheld his unfair dismissal claim, for which compensation is capped at £80,541. There is no cap if a tribunal finds that an employee was dismissed for blowing the whistle.
Before blowing the whistle, employees should request their employer’s copy of their records – everything they have on file. If an employee experiences retaliation such as disciplinary proceedings, it should be requested again to show a clear ‘before and after’ of how the employee has been treated.
Finally, work quickly. Employees only have three months to bring an unfair dismissal claim to an employment tribunal.