Criminal Finances Bill — House of Lords, 2017-04-25
Topic: Domestic Commerce
Susan Williams (Conservative, Centre-right): My Lords, I thank the noble Baroness for bringing forward this amendment, which would introduce new regulations so that the FCA could undertake the administration of arrangements to facilitate whistleblowing in the financial sector The FCA is already a prescribed person in relation to the financial sector. It actively promotes the whistleblowing framework to employees and employers in the sector so that prospective whistleblowers know where to turn and firms have appropriate internal whistleblowing policies in place. Other prescribed persons related to financial services include the Bank of England, the Serious Fraud Office, the Financial Reporting Council and the Prudential Regulation Authority. To each of them, whistleblowers will be one of several sources of information and intelligence about potential malpractice in support of their regulatory activities The Government believe that the right body to investigate the concerns of a whistleblower is the body that regulates the issue about which concerns are raised—I know I have said that before. That body is in the best position to see the disclosure in context; for example, to judge the seriousness of the allegations, to make connections with any related investigations under way and to consider whether some regulatory action is appropriate to prevent occurrence The amendment that the noble Baroness proposes would introduce a power to award compensation to any worker voluntarily providing information on wrongdoing to organisations in the financial sector. As I set out in Committee, we do not think that money is the main motivator for genuine whistleblowers. I do not think the noble Baroness thinks so either, but she expressed views on how a financial incentive system to encourage whistleblowing works well in the US. I can advise noble Lords that the FCA and Prudential Regulation Authority whistleblowing management teams visited the US in late 2013. At the time, there was limited empirical evidence of incentives leading to an increase in the number or quality of disclosures received by regulators. Introducing incentives would require a complex and costly governance structure Incentives could also undermine effective internal whistleblowing mechanisms, a requirement the FCA introduced in September 2016 for banks, insurers and deposit takers. If the FCA were to incentivise whistleblowers to report to the regulator, it could discourage them from reporting internally within their firms. It would risk delivering mixed messages by encouraging firms to set up costly systems which it then undermines by incentivising whistleblowers to disclose directly to the FCA. However, the FCA is considering reviewing the case for incentivisation again in financial year 2017-18. I would be happy to provide an update following that review The amendment also contains a provision with regard to retaliatory action against whistleblowers. I reiterate and reassure noble Lords that such a provision is unnecessary. Workers who have evidence that their employer has provided a negative reference, have been unfairly dismissed or have otherwise suffered detriment for making a public interest disclosure already have a route to seek compensation against their employer through an employment tribunal Some concerns were raised that we have seen a decline in the number of whistleblowing cases for the second year in a row, from 1,340 in 2014-15, to 1,014 in 2015-16 and 900 in 2016-17. The FCA does not have a target for the numbers of whistleblowing reports. Its aim is simply to ensure that those who prefer to report to an independent body know about its role and that, if they need to take the often difficult step of reporting on an employer, they and their information will be treated sensitively and professionally. New rules came into force in September 2016 that require banks, building societies and insurers to have internal whistleblowing arrangements in place and to appoint an internal champion. We understand many firms began to implement these measures earlier than the commencement date, so we believe that this has affected the numbers going directly to the FCA. This is a positive message as many complaints are resolved earlier and without regulatory intervention, or lead to self-reports by firms themselves I want to address one point made by the noble Baroness: how we became aware of the issue regarding the investigation of the whistleblower’s identity by the CEO of Barclays and what action the FCA is taking. I recognise the concern that the noble Baroness raised about the Barclays example and I agree that behaviour of the kind she described does not serve the reputation of the industry nor the interests of the country. We must do all we can to prevent this type of behaviour. As the noble Baroness said, I realise that time is short but this issue is not going away. I ask whether she would be amenable to withdrawing her amendment, fully aware that I will hear more about the subject after the general election, should the outcome return a Conservative Government.