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Clifford Chance

Regulatory Investigations and Financial Crime Insights

Looking ahead to whistleblower protections in 2019 in the US, UK and EU

Financial institutions should be monitoring expected changes to whistleblower protections in the US, UK and EU, which will require enhancements to existing policies to prevent your financial institution from making a critical misstep in an ever-changing legal area.

The United States

On January 7, 2019, the New York Department of Financial Services (DFS) issued its "Guidance on Whistleblowing Programs" to all institutions regulated by DFS.  The Guidance provides the "principles that all regulated institutions should account for when designing and implementing a whistleblowing program."  DFS provides minimum considerations, many of which focus on protection for the whistleblower, including "(2) Strong protections for a whistleblower's anonymity," "(7) Protecting whistleblowers from retaliation," and "(8) Confidential treatment."  DFS also notes the importance of having a "top-down culture" that supports whistleblowers coming forward as part of an overall approach to compliance.  Financial institutions reexamining and enhancing their whistleblower policies and procedures would be wise to take into consideration the guidance provided by DFS.

The United Kingdom

In November 2018, the Financial Conduct Authority (FCA) issued its "Retail and Wholesale Banking: review of firms' whistleblowing arrangements," in which it identified areas of good practice and areas for improvement, the whistleblowing champion's role, and training.  In each of the "areas for improvement" the theme of inadequate protections or training/information about such protections for whistleblowers is apparent.  The FCA encouraged firms to review its findings and consider the steps needed to improve their whistleblowing arrangements.  Having reiterated its expectations and highlighted areas for improvement, the clear implication is that senior managers and firms can expect further enforcement action if they continue to fail to meet the necessary standards.

At the very end of 2018, the FCA signaled that it would be announcing details of its plans relating to how it deals with whistleblowers.  The details of these whistleblower protections have not yet emerged; however, a Financial Times article suggests that there will be "significant improvements" with a focus on maintaining whistleblower confidentiality and improving senior oversight of investigations.

The European Union

The EU's move toward protecting whistleblowers began in earnest in April 2018 with a focus on organizations with more than 50 employees or of any size when operating in the area of financial services or vulnerable to money laundering or terrorist financing being required to create "safe channels" for reporting wrongdoing with its "Proposal for a Directive of the European Parliament and of the Council on the protection of persons reporting on breaches of Union law."  The proposed Directive includes "Conditions for the protection of reporting persons," which recognizes the need for strong protections for individuals who seek to alert their organization and authorities to potential wrongdoing.  The proposed Directive, furthermore, includes that Member States shall provide for effective, proportionate and dissuasive penalties applicable to natural or legal persons to ensure the effectiveness of the rules on whistleblower protection: "Penalties against those who take retaliatory or other adverse actions against reporting persons can discourage further such actions."

Late last year also saw developments in the EU, with the European Parliament Legal Affairs Committee MEPs approving draft legislation and early this year the European Council adopting a position on the directive on the protection of whistleblowers.  The proposed directive provides that Member States shall bring into force the laws, regulations, and administrative provisions necessary to comply with the directive by May 15, 2021, at the latest.