It goes without saying that in recent months Brexit has been at the forefront of the minds of those working in financial services in the City.
No doubt, Brexit will continue to dominate the headlines for years to come. However, we should not let Brexit overshadow or mask the sweeping reforms already taking place across the world of financial services. One such area of reform is in relation to whistleblowing.
Over the last decade, the financial services sector has been hit by wave after wave of high profile whistleblowing scandals: the involvement of banks in Libor manipulation, tax evasion, mortgage fraud and money laundering to name but a few.
In 2013, the Parliamentary Commission on Banking Standards (PCBS) highlighted the rarity of whistleblowing complaints and the poor levels of legal protection for whistleblowers. The PCBS’s recommendations were the genesis of new rules coming into force today.
From today, banks must have introduced a range of measures to give more protection to whistleblowers. The rules are designed to encourage people working in the financial services sector to raise the flag on malpractice without fear of reprisals.
A key feature of the reforms is that each bank must appoint a senior manager (known as a “whistleblowers’ champion”) to take ultimate responsibility for whistleblowing systems and governance. This is a significant burden indeed, as if processes are found to be inadequate, both the senior manager and the bank could find themselves prohibited from carrying out regulated work.
And the new rules are not going to remain limited to banks. All regulated businesses will have to comply with the rules by 2018, and voluntarily compliance is already being encouraged by the regulators.
With the number of whistleblowing reports made to the regulators increasing year on year, you could argue that there has already been a positive culture change within the industry. The more cynical among us however suspect that this rise could also be attributed to the fact that whistleblowers often receive large out-of-court settlements from employers keen to avoid regulatory sanctions and reputational damage.
Whether these new rules will be effective in giving whistleblowers the confidence to come forward – without the draw of a financial settlement – remains to be seen.