The Problem: Gaps in Financial Compliance

Despite numerous regulatory measures and compliance programs in place, financial misconduct remains a persistent issue. Consider this: the UK’s Financial Conduct Authority (FCA) imposed fines totalling £313.6 million in 2022, up from £189.8 million in 2021, according to the FCA’s website.

These fines underscore the inability of some internal compliance systems to detect or prevent malpractice altogether. Often, internal compliance teams lack the resources, independence, or visibility required to uncover systemic issues. This is where whistleblowers come into the picture.

For example, in 2020, a whistleblower exposed one of the biggest money laundering scandals in history when it was revealed that Danske Bank had allowed €200 billion in suspicious transactions to flow through its Estonian branch. The whistleblower, Howard Wilkinson, flagged the issues internally for years to no avail before eventually going public.

The necessary question becomes: how can organisations integrate whistleblowers into their compliance strategy more effectively?

The Solution: Encouraging and Supporting Whistleblowers

Whistleblowers provide a crucial line of defence against illegal and unethical activities within organisations. A robust compliance programme must, therefore, incorporate steps to encourage, protect and support them effectively.

1. Establishing a Secure Reporting Mechanism

One of the most important facets of supporting whistleblowers is providing them with a safe and easy way to share their concerns. The UK’s Public Interest Disclosure Act (PIDA) provides legal protection for whistleblowers, but companies can take it a step further by implementing secure, anonymous reporting platforms.

A simple example is HSBC’s “Global Open Door” platform, which allows employees to report misconduct anonymously. Such programs provide assurance to potential whistleblowers and reduce the risk of retaliation.

2. Cultivating a Whistleblower-Friendly Culture

A solid whistleblower programme begins with culture. Employees must believe that speaking up is supported—and appreciated. According to a 2021 report by Deloitte, 55% of surveyed employees refrained from reporting observed misconduct due to fears of retaliation.

• Make it clear that the organisation stands behind whistleblowers.
• Foster a “speak-up culture” through regular training and open communication.
• Acknowledge disclosures openly—where possible—to encourage others.

3. Prioritising Legal and Emotional Protection

Given the high stakes involved, whistleblowers often face serious consequences, including termination, ostracisation, or even psychological distress. A robust compliance function must prioritise their protection by:

1. Ensuring compliance with legal obligations under PIDA or similar whistleblowing laws globally.
2. Offering access to Employee Assistance Programmes or counselling for those undergoing stress.
3. Prohibiting retaliation and holding accountable any personnel seeking to punish whistleblowers.

The Benefits of a Whistleblower-Integrated Compliance Program

Organisations that embrace whistleblowers as part of their compliance framework stand to reap significant benefits, including:

1. Early Detection of Misconduct

Whistleblowers offer critical insights and early warnings about issues that might otherwise take years to uncover—or escape notice entirely. This early detection often helps organisations avoid hefty penalties or regulatory actions.

2. Enhancing Organisational Reputation

Firms that establish sound whistleblower policies are more likely to come across as ethical and transparent. According to a survey conducted by the Economist Intelligence Unit, 52% of global executives agreed that strong whistleblowing mechanisms improved their brand reputation.

3. Meeting Regulatory Expectations

Regulators such as the FCA, and international agencies like the US Securities and Exchange Commission (SEC), heavily encourage whistleblower participation. Without compliant whistleblowing frameworks, organisations may find themselves scrutinised—or even penalised.

4. Building a Robust Internal Culture

By championing whistleblower programmes, organisations create an environment of trust and ethical behaviour, reducing the likelihood of internal fraud over time.

Lessons from Real-World Cases

Several high-profile cases highlight the pivotal role whistleblowers play:

• Wells Fargo Scandal (2016): Former employees exposed unethical practices relating to fake accounts created to meet sales targets. This led to the bank paying over $3 billion in settlements and sparked critical changes in regulatory oversight.
• Wirecard Collapse (2020): An internal whistleblower’s persistence played a key role in the downfall of the German fintech giant, revealing one of Europe’s most notorious accounting scandals in modern history.
• LuxLeaks (2014): Antoine Deltour, a former PwC employee, exposed aggressive tax avoidance structures utilised by multinational firms, leading to increased scrutiny of corporate tax practices.

Conclusion

Whistleblowers are not just an add-on to financial compliance programs—they are an integral element of an organisation’s defence against fraud and misconduct. Beyond assisting with regulatory compliance, they help shape ethical corporate cultures, safeguard reputations, and strengthen internal systems against missteps.

To fully recognise the role of whistleblowers in compliance, firms must take conscious steps to build transparent, supportive frameworks that allow individuals to speak up without fear of retaliation. By doing so, they ensure that their financial compliance programs are not just regulatory checklists but proactive measures fostering accountability and integrity across every level of the organisation.

For more insights into enhancing your compliance strategies, explore the FCA’s guidelines on whistleblowing or consult industry experts who specialise in corporate governance and ethical practices.