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#Governance, Risk and Compliance

Transforming whistleblowing culture for the long term remains a challenge

International Compliance Association

FCA , inCOMPLIANCE , misconduct , PCBS , regulator , UK , whistleblowing

Since the Financial Conduct Authority (FCA) replaced the Financial Services Authority there has been a short run, but dramatic, trend in the UK towards greater whistleblowing activity. 2014 saw 1,367 complaints reported to the FCA, an increase of 44% on 2013 and of 142% on 2012. However, in 2015 reported complaints declined by a fifth compared with 2014, according to law firm Pinsent Masons.

This may be a cause for some concern to the FCA, as whistleblowing provides a useful source of intelligence for the regulator. For example, in 2014, “73% of the whistleblowing cases reported to the FCA led to intelligence reports being opened”. Moreover, Pinsent Masons suggests that the decline in reports seen in the UK is apparently out of step with the trend witnessed in other jurisdictions, such as the US (where whistleblowing is incentivized), implying that it is probably not a reflection of a concurrent decline in allegations of misconduct.

Further, this reversal is notable because whistleblowing dovetails with the regulator’s broader ambitions of promoting cultural change within firms, through the creation of environments in which employees feel better able to raise concerns internally without fear of unsavoury consequences. Indeed, following the recommendations of the Parliamentary Commission on Banking Standards (PCBS), the UK’s regulators have made efforts to encourage more whistleblowing, for example through rules effective from September requiring banks, building societies and other firms regulated by the Prudential Regulation Authority (PRA)to have adequate whistleblowing policies and procedures, including the appointment of a Senior Manager as a “whistleblowers’ champion”. The question many are asking is whether these measures need to be supplemented with incentives for whistleblowers.

These latest figures suggest just how challenging the task facing the regulators may be. Indeed, as ICA CEO Phil Ryan highlighted in this month’s issue of inCOMPLIANCE: “Powerful social forces are hardwired into the human brain by nearly 250,000 years of evolution [which] work strongly against speaking out against our peers or authority figures”. It remains to be seen whether regulators can achieve the transformation they are hoping for through current approaches – and there is of course no “quick fix” – but they will certainly be keen to arrest the decline observed in recent months.

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