Almost 12 months have passed since the FCA launched its ‘In confidence, with confidence’ whistleblowing campaign, aimed at encouraging individuals working in financial services to report potential wrongdoing directly to the FCA. 

The FCA has used a number of tools to shine a spotlight on the campaign, including publishing materials and toolkits, and using events to encourage individuals to have the confidence to step forward.

Since its launch, the FCA has published its whistleblowing data from quarters three and four of 2021. This data provides an opportune moment to assess the initial impact of the campaign.

In this article we explore whether, in its first year, the campaign has indeed encouraged more individuals to report concerns directly to the regulator, and whether any new trends are emerging via this channel which may inform future supervisory and enforcement strategies.

Impact on the number of reports being received

The data released by the FCA appears to suggest that the launch of the campaign has not yet resulted in an increase in whistleblowing reports to the regulator as intended. It is reported that between July and December 2021, the FCA received 568 whistleblowing reports. Averaging at just short of 100 reports per month, over a 12-month period this would equate to circa 1,000 reports, which is in fact a similar level to the number of reports received by the FCA in the previous year (1,046 received between April 2020 and March 2021).

Interestingly, the data indicates that there has been a slight reduction in the number of separate allegations raised within the reports received, with 1,043 separate allegations being raised in the six-month period between July and December 2021, compared to 2,754 separate allegations being raised in the previous year (equating to 1,377 allegations over an equivalent six-month period). It is however possible that the increased levels in the previous year were due to there being a number of Covid specific allegations, which may have been less prominent in the latter period.

The recent 2021 data reveals that in the majority of reports raised, individuals provided their identity and contact details to the FCA, which is positive and indicates that individuals have faith in the FCA to protect their identities whilst undertaking the investigation.

Impact on whistleblowing trends

The FCA data reveals that the key overarching themes identified in the allegations raised over the past two years have to a large extent remained the same. In particular, compliance, TCF, fitness and propriety, culture, systems and controls, fraud, consumer detriment and SYSC have consistently featured in the top ten themes, albeit in fluctuating orders.

The top theme in the latest three-month data published is fitness and propriety, which has consistently featured in the top three themes since April 2020. Allegations currently falling within this category amount to 35% of all allegations raised, which is a significant proportion. Firms should take the opportunity to assess whether this seems out of kilter with the number of fitness and propriety issues being escalated internally, as this may indicate a gap in escalation channels internally, or a cultural issue around blowing the whistle on individuals’ conduct. This theme is a vital reminder to firms that fitness and propriety assessments should not be approached as a tick boxing exercise and that alleged misconduct should be thoroughly investigated with appropriate action taken where behaviour falls below standard (including disciplinary, conduct rule and risk adjustment findings). Any systemic fitness and propriety issues identified via FCA whistleblowing channels that have not already been highlighted internally may lead to the regulator probing the adequacy of firms’ internal processes for undertaking fitness and propriety assessments, and for the escalation and review of potential misconduct of employees.

Closely behind is TCF, which has also featured in the top three themes since April 2020, and currently amounts to 26% of all allegations raised. This may be reflective of a number of factors including:

  • the impact of the pandemic on consumers, but also the fact that firms have had to navigate additional measures put in place by the regulators during the pandemic to support consumers;
  • the release of detailed guidance on the fair treatment of vulnerable customers during 2021 which firms have had to digest and successfully embed; and
  • the need to train and upskill employees on the changing landscape in this regard.

Notwithstanding this, it is expected that the treatment of consumers will continue to trend high in the upcoming months and years, not least given the significant focus on the pending Consumer Duty policy, which is set to impose a higher standard of protection for retail consumers. The proposed new cross cutting rules pose a significant operational challenge for firms to successfully map, embed and monitor, creating a risk that during the transitional period concerns may surface via whistleblowing channels.

Another consistent category in the top five key themes is culture. This is not surprising given the FCA’s increasing focus on non-financial misconduct over the past three years, but also the fact that the pandemic has refocussed attention on the importance of culture and wellbeing. The FCA has already indicated it will be scrutinising culture in the context of the suitability of firms’ long-term hybrid working arrangements. This thematic whistleblowing data is another lens through which the regulator can scrutinise culture. Having multiple data points to layer, including that received via supervision, will enable the FCA to build a holistic view of culture, something which may monitored by its internal culture teams. In anticipation, it is imperative that firms have in place adequate arrangements to measure and monitor culture, supported by appropriate governance and oversight.

There has been a large increase in the number of complaints about firms breaching the Financial Services and Markets Act 2000 (FSMA). Throughout 2021, this category has catapulted into the top ten themes and is currently the third highest theme. No further detail has been released by the FCA as to the specific parts of FSMA impacted. However, it would seem likely that financial promotions may be an area impacted given regulatory activity in this space recently.

SYSC 18 allegations of whistleblower detriment as a result of speaking up have emerged as a new top ten trend between July and December 2021. The regulator will likely pay close attention to this emerging trend given the direct link to psychological safety, something the FCA has been actively promoting over the last two years. Any allegations of detriment that are substantiated will likely result in the regulator probing a firm’s level of whistleblowing reports, the adequacy of internal whistleblowing arrangements (particularly in relation to confidentiality and the treatment of whistleblowers), in addition to culture driven by management in relation to whistleblowing.

Data security allegations are back on the rise, which the FCA has described as allegations of poor data handling or misuse within a firm or by an individual, including data breaches or weak systems to deal with or prevent such breaches. It is well known that cybercriminals have been exploiting the remote working environment to inappropriately obtain confidential information. Further, remote working has made employees vulnerable to exploiting data protection controls as a result of being out of sight. These matters could well have contributed to the increase in associated allegations. However, data security allegations will likely remain on the rise in the upcoming years particularly whilst firms are transitioning to digital banking and the use of big data technologies and artificial intelligence to drive efficiencies. It is key that firms are considering and monitoring how data is to remain secure when transitioning through change programmes, and are putting in place robust systems and controls to prevent breaches.

A year on it seems that the campaign has not yet had a notable impact on the number of whistleblowing reports being referred to the FCA, or indeed the key themes emerging from the allegations being raised. Rather, it seems that the fallout from the pandemic may still be driving in this space.

It is possible that the unfortunate timing of the launch of the campaign, coinciding with continued Covid restrictions, has resulted in there being less attention on the campaign than intended, and a continued focus on the same themes.

As we transition out of the pandemic, only time will tell whether the campaign does have a significant impact on the number and types of reports being raised with the regulator.

It does seem that a number of the current key themes will continue to feature over the next couple of years given the regulatory landscape and transformation that firms are currently navigating. The FCA will likely be paying close attention to these themes and so firms should take the opportunity to assess whether they can stand up to scrutiny in these spaces.

If you want to discuss any of the issues raised in this article please contact Chantal Peters on the details below.

Date published

11 March 2022

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