Blow the whistle and they are off: the US sprints forwards on incentivising whistleblowers, with the UK (considering) closing the gap

In his recent February 2024 speech at the Royal United Services Institute (RUSI), the new UK SFO Director, Nick Ephgrave, proposed paying whistleblowers to incentivise them to provide "smoking gun" evidence.  Only a month later, in March 2024, the US Department of Justice (DoJ) announced its own plans to press ahead with a new programme of incentivising whistleblowers.

In this article, Judith Seddon, Tristan Bramble, Asha Owen-Adams and Eleanor Robinson examine the parallel messaging from US and UK enforcement agencies on incentivising whistleblowing. In short: they may not be travelling at the same pace, but the two agencies appear to be heading in the same direction towards legislative and strategic change on whistleblowing. 

The position in the UK

The UK has historically had a culture which expects people to 'do the right thing' without  renumeration or reward. In 2014, the UK's Financial Conduct Authority researched and rejected the idea of paying whistleblowers, concluding that financial incentives for whistleblowers would be unlikely to increase the number or quality of the disclosures that they receive, citing concerns about entrapment, conflict of interest, malicious reporting and negative public perceptions as potential "moral and other hazards" that would result from incentivising whistleblowers.

Ten years on, there have been developments: since 2017, the Competition Markets Authority (CMA) has run schemes offering rewards for reporting illegal cartel activity and recently it increased its informant reward to up to £250,000. HMRC have a discretionary reward for reporting tax fraud which, according to research from Reynolds Porter Chamberlain last year, increased to over £500,000 paid to whistleblowers in the year 2022-2023. 

In 2023, the UK government announced it was commencing a review of the legislative framework around whistleblowing and we await the publication of the government's research. 

Ephgrave's comments therefore come at a time when the UK is open to reforming its approach to whistleblowers. 

Inspiration from across the pond

The softening of the UK's approach appears to be, at least in part,  a result of comparisons with US counterparts. In his recent speech at RUSI, Ephgrave said: "I think we should pay whistleblowers. If you look at the example of the United States of America, their system allows that, and I think 86% of the $2.2 billion in civil settlements and judgements recovered by the US Department of Justice were based on whistleblower information."

RUSI is the world's oldest and the UK's leading defence and security think tank. Central to its mission is to inform, influence and enhance public debate – and in his speech the SFO Director referred to RUSI conducting transatlantic research and fieldwork (likely to speak to the ‘how to’ of implementation) for incentivising whistleblowing. No doubt the SFO Director will be awaiting the outcome of that research.

Over recent weeks, the SFO Director has publicly indicated his desire to maintain close links with the US, and has shown a keen interest in what they are doing. In New York he met with key partners such as the U.S. Attorney for the Southern District of New York (SDNY) which includes US financial centre Wall Street.  In Washington, DC he met with several senior leaders in the Criminal Division.

Ephgrave is not alone in being inspired by the US. Recent comments from Baroness Susan Kramer in the House of Lords echoed Ephgrave's enthusiasm for following the US approach. As part of a debate on upcoming legislation for Digital Markets, Competition and Consumers, Baroness Kramer criticised the lack of rewards and safeguards for UK whistleblowers, highlighting the significant success reward schemes have had in encouraging the disclosure of wrongdoing. Furthermore, she informed the House of Lords that the US Commodity Futures Trading Commission (CFTC) reported that around 25% of their cases arose from a tip from a UK whistleblower. 

Ready to go - the US plan to sprint on Whistleblowing

On 7 March 2024, Deputy Attorney General Lisa Monaca announced a DOJ-run whistleblowing rewards program. She has proposed a "90-day sprint" to develop and implement a pilot program, whereby "if an individual helps DOJ discover significant corporate or financial misconduct — otherwise unknown to us — then the individual could qualify to receive a portion of the resulting forfeiture." 

Monaco acknowledged there was currently a “patchwork quilt” of existing whistleblowing programs, run out of the SEC, CFTC, IRS, and FinCEN which do not address the full range of corporate and financial misconduct that the DOJ prosecutes.  This pilot program, with a formal start date to be announced later this year, is therefore designed to "fill the gaps".  The announcement came less than a month after the SFO Director's speech. The starting gun has sounded, the race is on. 

What does this mean for UK firms and corporates?

The SFO Director has sought to differentiate himself from his predecessors – in his opening words he stressed that he is not a lawyer but "a law enforcer" and as such, perhaps, one of the key messages in his speech was his intention to accelerate the SFO's cases. To achieve this, he is open to exploring new tools to improve the quantity and quality of intelligence that the SFO receives. 

His comments come at a time when the incentivisation of whistleblowers is perhaps not as counter-cultural in the UK as it once was; the evidence suggests that, even if not progressing at the pace of a sprint, the UK is jogging behind.  

Furthermore, leaving financial incentivisation to one side, the importance of encouraging whistleblowing is very clearly part of what regulators and prosecutors expect from a good corporate culture.

Authors: Judith Seddon, Eleanor Robinson, Tristan Bramble (Ashurst Risk Advisory), Asha Owen-Adams