Whistleblowing is one of the most powerful weapons in the fight against fraud, money laundering and corruption, but the United Kingdom’s approach needs to be reconsidered. Whistleblowing can be a testy subject, but I believe it is potentially one of the most powerful weapons in our anti-money laundering (AML) arsenal.
By: Tony McClements
Whistleblowing can be a testy subject, but I believe it is potentially one of the most powerful weapons in our anti-money laundering (AML) arsenal. Anyone watching countless cop shows and movies will be all too aware of the value that an insider brings to an investigation. In the U.K., these “snouts,” as they’re called, are treated very differently than their U.S. counterparts. In the U.S., whistleblowers can stand to make a lot of money from their disclosure.
The U.S. Securities and Exchange Commission (SEC) provides an insight into the difference:
“The Commission is authorized by Congress to provide monetary awards to eligible individuals who come forward with high-quality original information that leads to a Commission enforcement action in which over $1,000,000 in sanctions is ordered. The range for awards is between 10% and 30% of the money collected.”
This notion of incentivizing the whistleblower process does not sit comfortably in the U.K.
I have long advocated for the U.K. to follow the U.S. model. Anybody who makes the decision to embark upon becoming a whistleblower knows that it will likely cause irreparable damage to both their current and future career.
Unfortunately, this can serve to mute whistleblowers. They are not cowards, merely realists. Having families to feed and bills to pay is a heady consideration. In the U.S., whistleblowers can at least have some confidence that if their information leads to a successful prosecution, they may be rewarded. There is a risk versus reward element to their decision, unlike here in the U.K.
Some of the whistleblowing rewards in the United States are, of course, eye watering. In 2021, the SEC passed the $1 billion dollar threshold for rewards made, including a payment that year exceeding $110 million. I am not advocating that a U.K. system should precisely mirror that in the U.S. — merely that we should be able to formulate more realistic rewards that will justify an individual’s decision to whistle blow, enabling them to make that risk versus reward judgment about the impact on their career.
Could rewarding whistleblowers encourage malicious reporting for profit? In my experience and view, such instances are rare, and the outcome is unlikely to result in a prosecution or sanction.
Those reading this article will likely be steeped in the regulated systems that form the foundation for AML and anti-corruption efforts. They may also consider themselves, by default, to be a potential target for a malicious whistleblower. I see Money Laundering Reporting Officers (MLROs) as being akin to “deputized” law enforcement officers. Their role may see them called upon to make decisions not unlike those made by police officers.
I believe it is the fear of malicious whistleblowing that has been at the heart of the U.K.’s resistance to the U.S. model. However, the recent case involving the Royal Bank of Canada in London should go some way to assuaging these concerns. In this instance, a whistleblower at the bank claimed they had been “managed out” of the organisation because they had passed information to the regulator, alleging constructive dismissal. An employment tribunal, however, found no basis in fact and dismissed the case. Bear in mind that this was merely a constructive dismissal case -- not a hearing that could lead to multi-million-dollar fines or even prosecutions leading to culprits being incarcerated. This result goes to the core of my argument.
The fact that the respective thresholds for fines or convictions are set so high means that only those who have committed wrongdoing should be concerned by allegations of this type. Before anyone asserts that this is an easy notion for me to voice (as these possibilities will never apply to me), I should point out that, in the police service, we were all subject to malicious complaints every day of the year. Only those who were guilty lost any sleep.
The point I am seeking to make is that incentivizing whistleblowers is only a bad thing if their allegations are unfounded in fact and unsupported by corroborative evidence. In effect, the U.K. needs to accept that some malicious, ill-founded allegations are likely. But nobody has anything to worry about unless they have erred, given the safety measures in place in the form of investigation and evidential thresholds.
Unfortunately, the current status quo in the U.K. is more likely to allow the crooked to get away with the frauds and malpractice we all want to see exposed. We should not continue to oppose a system that is designed to help us rid the world of such corrupt individuals. Neither should we continue to reject the notion that whistleblowing deserves rewards simply because someone may occasionally make an unfounded accusation.
The whole ethos of the U.K.’s position regarding whistleblowing needs to be reconsidered. Directors and CEOs of organizations operating in the regulated sector need to accept that at some stage they will be subject to a complaint, and that their MLRO should be supported until such time as there is a failure to be addressed—just like the police.
Tony McClements is Managing Director of Investigations at Martin Kenney & Co (MKS), and a guest lecturer in Fraud and Financial Investigation at the University of Central Lancashire. He is a 33-year veteran police detective investigating serious & organised crime, specialising in the investigation of fraud since 1998.
