Whistleblower incentives scheme part of SFO business plan

In its latest annual business plan (9-page / 2.8MB PDF), the SFO also confirmed plans to “promote” the new offence of ‘failure to prevent’ fraud, which will come into force in September under the Economic Crime and Corporate Transparency Act 2023, and to take steps to improve its approach to disclosure and document review.

The business plan lists “progress whistleblower incentivisation reform” as one of the SFO’s planned outputs for the year 2025-26. That output is linked to a stated desired outcome of combatting crime effectively through intelligence, enforcement and prevention.

In the UK, whistleblowers are protected under the Public Interest Disclosure Act 1998 (PIDA) (111 pages / 384 KB). The legislation ensures that individuals who disclose information about wrongdoing in the workplace are safeguarded from retaliation. The protections cover a range of disclosures including criminal offences, health and safety dangers, environmental damage, and miscarriage of justice.

However, critics argue that the existing laws do not go far enough to protect whistleblowers and that more needs to be done to encourage individuals to come forward with information about wrongdoing. The introduction of a corporate whistleblower rewards pilot programme in the US last year has prompted renewed calls for reform in the UK.

In his foreword to the business plan, SFO director Nick Ephgrave QPM said: “We will remain at the forefront of policy development, pushing for new initiatives such as progressing whistleblower incentivisation reform.”

Tom Stocker of Pinsent Masons said: “Whistleblower financial incentives are a feature of US and Canadian white collar and corporate criminal enforcement, but it would represent a significant policy shift in the UK where there is a reticence about the reliability of incentivised reports and concern that it risks incentivising mischief making and false reports as well as genuine reports. The SFO knows that any proposal to incentivise whistleblowers will be controversial and I would anticipate it will take a staged approach with there being a consultation, potentially followed by a pilot scheme.”

On 1 September, the new offence of organisational ‘failure to prevent’ fraud will come into force. Under the new regime, large organisations face criminal liability if they fail to prevent outward frauds intended to benefit the organisation or a client of the organisation – unless they have reasonable procedures in place to prevent fraud by associated persons of the business. Effective internal whistleblowing process are highlighted in the Home Office’s guidance to organisations on the procedures they should be putting in place in advance of September. A fraud risk assessment and top-level commitment to an anti-fraud culture are also important features of the government’s guidance.

In its business plan, the SFO said it plans to “promote” the new offence this year, with Ephgrave trailing publication of the agency’s “refreshed corporate guidance”.

Stocker said: “We anticipate the new corporate guidance will address the SFO’s expectation on the conduct of internal investigations by businesses. It needs to more balanced and practical than the SFO’s previous corporate co-operation guidance which adopted an overly law enforcement lens without an appreciation of the competing business and legal considerations that always apply to decisions around the conduct of internal investigations. We are also likely to see the SFO encouraging corporate self-reporting, which has slowed as businesses and their lawyers have questioned the merits and costs associated with self-reporting.”