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Whistleblowing in financial services: upping the ante

Author
Sarah Henchoz

Partner

London

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25 March 2021

The FCA has just upped the ante with regard to whistleblowing with its latest campaign “In confidence, with confidence”, designed to encourage individuals working in financial services to report potential wrongdoing directly to it.

The FCA has a well-resourced and trained team, which understands that it is not easy to speak up, so it will take the time to listen and understand the concerns being raised, even meeting up, if necessary. And, crucially, the FCA will protect the whistleblower’s identity throughout the process, or she/he may choose to remain anonymous.

While firms offer similar internal channels through which employees can speak up, the fear of retaliation remains a key factor in many choosing not to do so. Reporting directly to the FCA “In confidence, with confidence” seeks to allay such concerns. This campaign highlights how seriously speaking up is being taken by the regulators. The fact the FCA has stepped in to emphasise to individuals that they can report their concerns directly, indicates that the regulator does not consider that the steps firms have taken to provide safe environments for whistleblowers have been sufficiently effective.

Which is the safest route to speak up?

Put yourself into the shoes of an individual debating whether to speak up about potential wrongdoing. What would be the least risky option? Disclose internally or directly to the FCA? The answer will depend on the culture of the firm; is it one that encourages speaking up and makes individuals feel “psychologically safe”? Or is it an environment where raising concerns is equated with “troublemaker” and the most likely outcome is dismissal or some other form of detriment? Even if the workplace is somewhere in between these polar opposites, there is a reasonable chance that potential whistleblowers will opt for the route which offers them the most protection.

What's new?

There are no new rules or laws underpinning the FCA’s latest campaign. Employees have always been able to report their concerns directly to the FCA; indeed those firms covered by the FCA and PRA's rules on whistleblowing are required to communicate to UK-based employees that they may raise concerns directly with the FCA (and/or PRA) and the methods for doing so. Neither has the FCA made any secret of the fact that culture and governance remain a key priority for it, and it is a firm’s whistleblowing arrangements that are the litmus test for a healthy culture and effective governance.

What is new, is the FCA’s focus on the whistleblower as an individual, rather than on the misconduct. Gone is the forensic, compliance-based approach in favour of one that speaks directly to whistleblowers and their predicament. Generous language like “welcome” and “valued” and “you won’t need to prove to us you are right” and “protecting the identity of our whistleblowers is at the heart of what we do” acknowledge that whistleblowing is as much about the whistleblower as it is about the concerns they raise.

Next steps

Anyone involved in culture transformation will tell you that this is not something that happens overnight or with a tick-box checklist. That said, if firms are aiming to improve their culture to encourage internal reporting, then immediate steps could include the following:

  • Start by reviewing the FCA campaign to understand how it is encouraging direct reporting and what steps it has taken to make whistleblowers feel safe.
  • Assume there will be direct reports to the FCA, which may generate interest from the regulator as to why an external disclosure was the preferred route.
  • Be prepared to manage parallel internal and external investigations, and ensure that this eventuality is covered off in whistleblowing processes and operational documentation.
  • Ensure current whistleblowing arrangements are well-resourced, and capable of progressing investigations efficiently. Lengthy internal processes may encourage external disclosure.
  • Ask staff whether they feel they can raise ideas and concerns in pulse surveys; note it is also important to position your message in a way that assures staff that whatever they want to speak up about (good or bad), their voice will be heard.
  • Consider internal campaigns to promote the positive side of whistleblowing using real life examples of where speaking up has led to positive change.
  • Review training materials to assess whether they strike the right note and reflect that speaking up is valued.
  • Management should set the tone from the top; if there is a whistleblowing champion, what proactive steps is she/he taking to create the right environment?
  • Consider whether your communications with the whistleblower are sufficient. Some feedback, even to explain why it is not possible to provide detailed information, may go some way towards making individuals feel that their concerns have been taken seriously.

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