The UK is looking at paying whistleblowers to tell on their bosses
The UK government has launched a new consultation which looks at the possibility of introducing US-style financial rewards for whistleblowers who report economic crime.
The proposals form part of a broader review of the UK’s whistleblowing framework under the Employment Rights Act 1996 and could represent one of the most significant reforms to whistleblower protection in quite a while, explains Ruby Dinsmore, Partner at law firm Penningtons Manches Cooper.
Under the government’s preferred model, individuals who provide significant and original information about fraud, bribery, corruption or other economic crime to the Serious Fraud Office could receive a financial reward where their information leads to a corporate conviction or other enforcement outcome.
The proposed reward would be calculated as a percentage of the financial penalty imposed, mirroring schemes already operating in the United States and, to a more limited extent, Canada.
Dinsmore notes that the government’s preferred model has been heavily influenced by the success of whistleblower reward schemes operating in North America. However, she noted that there were both arguments for and against introducing financial incentives.
“Supporters argue that economic crime is often difficult to detect because it is concealed within organisations. Employees, consultants and advisers may possess critical evidence that regulators would never otherwise obtain. Importantly, reward schemes recognise that whistleblowing can carry significant personal consequences,” she said.
“Individuals may suffer damage to their careers, workplace ostracism, lengthy litigation and financial hardship because of blowing the whistle. Financial incentives, supporters say, acknowledge these risks and encourage individuals to come forward earlier.”
Proponents also point to the success of the US’s Securities and Exchange Commission programme, which has generated a substantial volume of actionable intelligence and led to significant enforcement outcomes, she said.
By comparison, critics argue that introducing financial rewards may alter the motivation for whistleblowing, encouraging reports driven by personal gain rather than genuine concerns about wrongdoing.
“Some employers fear that it could discourage internal reporting, with individuals choosing to bypass internal whistleblowing processes in favour of a potentially lucrative external reward,” she said.
“There is also concern about an increase in speculative or weak allegations, placing greater strain on regulators and employers. While regulators can filter out unmeritorious complaints, the cost and disruption associated with investigating allegations can still be significant.”
Importantly, the government’s proposals regarding financial incentives should not be confused with the existing legal protections available to whistleblowers under employment legislation, Dinsmore said,
“The current consultation is primarily concerned with encouraging the reporting of economic crime and strengthening the wider whistleblowing framework, including whether financial rewards should be available where information leads to successful enforcement action by bodies such as the Serious Fraud Office.”
