Adopting a system of financial rewards for whistleblowers in the UK

TLT picks out the key points you shouldn’t miss...

What’s this about?

On 10 December 2024, the Royal United Services Institute published a report studying the pros and cons of adopting a framework for rewarding whistleblowers in the fight against financial crime. The paper concludes that if implemented correctly, whistleblower reward schemes increase reporting to law enforcement agencies, create a deterrent, and strengthen private sector compliance.

Our Head of Risk and Compliance Advisory, Ben Cooper says... 

“This is a fascinating paper which supports introducing a scheme to reward whistleblowers. Nick Ephgrave (Head of the SFO) is squarely behind such a scheme, stating that there is an unanswerable case for reform to stop the intelligence drain overseas. The FCA has also now changed its opposition to rewarding whistleblowers. With such endorsement, we may see a pilot in 2025, watch this space…”

The points not to miss...

• Rewards can work, but not in isolation: For a reward scheme for whistleblowers to be accepted by market stakeholders, provide the desired regulatory outcomes, and be efficient and cost-effective, it needs to be part of a wider specially designed regulatory framework, levelling the playing field between individuals with limited resources, who have decided to blow the whistle, and firms, with deep pockets, that might wish to retaliate.
• Rewards as a tool and not compensation: As part of the new whistleblowing framework, reward should be considered as a regulatory avenue to successful investigations and effectively fighting economic crime. Evidence shows that appropriate levels of reward motivate whistleblowing and does not detract from the quality of information obtained. Rewards should not be seen as substitutes for whistleblower remedies and protective measures.
• The quality of the information is paramount: There needs to be a shift from judging the trustworthiness of the individual to the quality and veracity of the information provided. This way the rewards framework incentivises complicit insiders, who often are the most valuable sources of information about economic crime, to blow the whistle. It also provides a regulator with a focus on triaging the information appropriately to obtain the desired outcome.
• A strong regulatory body is key: A new regulatory body (Office of the Whistleblower) should be given strong anti-reprisal powers to protect whistleblowers, maintain and enforce the new rewards framework, and proactively litigate against firms that adopt anti-whistleblowing or retaliatory practices (such as NDAs, prosecution of whistleblowers, or harassment).
• Balancing act between internal and external reporting: Careful consideration has to be given to the balance between internal reporting frameworks, regulatory compliance requirements, professional privilege, and the availability of a regulatory cash-for-information framework, in order to avoid undermining effective internal whistleblowing mechanisms being adopted by firms.
• Strengthening private compliance: Providing a regulatory reward incentive for whistleblowers has been instrumental in motivating firms to bolster internal processes and provide more effective systems for reporting illicit activities, process reported concerns and protect whistleblowers.
• An adaptive and evolving framework works best: Such a reward scheme should not be regarded as “set and forged” and a future regulator will need to actively engage with fellow regulatory and legislative bodies, enforcement agencies, firms, and individuals to keep in pace with the ever-evolving economic crime activities.
• Considering the views of all affected persons: Consultation with the wider market must be integral to the new regulator’s enforcement strategy to provide appropriate levels of oversight and effective enforcement of a cash-for-information regime.

What next?

Nick Ephgrave, Director of the Serious Fraud Office (SFO), fully supports introducing a scheme to reward whistleblowers. He describes there being an unanswerable case for reform, to stop the intelligence drain overseas, particularly to the United States.

In complex financial crime cases the evidence is often well hidden, and he says whistleblowers are key holders who can point the SFO, and other prosecutors, in the right direction. The average SFO case has 5,000,000 documents, so a whistleblower pointing the SFO in the right direction significantly reduces disclosure and produces stronger evidence, which in turn leads to early guilty pleas, freeing up court time and saving money.

The only argument he can see against such a scheme is that ‘it’s just not British’ which he finds baffling. As a nation, we are comfortable paying criminals for information, but are for some reason squeamish about paying non-criminals for information relating to serious financial crime.

At a glance...

Authors: Ben Cooper and Pepi Ivanov

This publication is intended for general guidance and represents our understanding of the relevant law and practice as at December 2024. Specific advice should be sought for specific cases. For more information see our terms & conditions.