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From: Financial Reporter
By Jan Stappers LLM, EU Whistleblowing Specialist, NAVEX
October 11, 2022

Whistleblowing is a growing phenomenon in the financial services industry. As part of its ‘in confidence, with confidence’ whistleblowing campaign, the FCA reported a 500% increase in whistleblowing from 2017. 

“With regulations catching up with reporting, not taking action to manage issues in the workplace could result in serious penalties, such as regulatory fines and reputational damage.”

But despite this increase, the FCA is not in a position to quickly assess the reports it receives. By May this year it still hadn’t reviewed 75% of the reports it received in 2021, and still has over 400 reports from 2020 and 2019 to review.

The growing number of reports clearly indicates a shift in the industry. However, a lack of timely action can discourage whistleblowers from coming forward, resulting in fewer reports to the FCA. To maintain this high level of reporting, the financial services industry should implement changes now, but how?

Continue reporting

Naturally, reporting is an important means to learn about misconduct and help pre-empt future issues. Reporting can take place in multiple ways, including external bodies such as the FCA or through internal whistleblowing hotlines within the financial institution.

Whistleblowers can continue reporting to the FCA as the external reporting body for the financial services industry. With new regulations such as the EU Whistleblowing Directive being transposed across Europe - and other legislation soon to follow in the UK - the FCA will have to take action to listen to whistleblower reports to meet these new rules.

Aside from the FCA, organisations should also implement their own whistleblowing policy that is appropriate to the business. When employees report potential wrongdoing within the organisation first, it gives the organisation the opportunity to proactively address the issue. In this way, the bank communicates to employees that it takes concerns seriously and is invested in improving its corporate culture to ensure it fosters an ethical and compliant environment. While deploying these policies mean organisations stay compliant with the new whistleblowing regulations, they also benefit from streamlined processes. Last, by encouraging employees to speak up, organisations communicate the importance of hearing from employees directly, which translates into greater employee loyalty and satisfaction.

Technology as a solution

Encourage employees to report internally first with a whistleblowing hotline (or helpline) that allows employees to anonymously report wrongdoing at work. A hotline uses technology to drive a data focused process for tracking complaints and patterns in reporting, which is crucial for encouraging employees to report issues. Whistleblowing technology makes the process of managing reports more efficient, secure and reliable.

Technology enables organisations to more easily analyse the hotline data and offer training on these issues. Financial organisations should deploy technology to help them communicate with anonymous reporters and reassure them that their report is being investigated and acted upon, as appropriate. Building a culture of trust, with the use of technology in a financial organisation encourages others to act, who may have previously been disheartened or even afraid to speak out because of the lack of action by the FCA. It’s important businesses proactively address the fear of retaliation and take each report seriously to create a positive speak up culture.

By setting an example, people who witness wrongdoing in the financial services sector and those who speak out about it, will encourage others to speak up. Organisations should encourage a speak-up culture where everyone is encouraged to share wrong-doing. When the business shares metrics around reports, such as percent substantiated and number of reports where action was taken, employees feel assured that their voice matters, helping to ultimately ensure a culture of ethics, trust and fairness.

Changing the financial services sector

Whistleblowing in the financial services industry operates differently than in other industries, mainly because it has its own external reporting body (the FCA). The implementation of the FCA’s new whistleblowing campaign highlights that it is beginning to tackle issues around whistleblowing in the sector but also that there is still more to be done. NAVEX’s 2022 Definitive Risk & Compliance Benchmark Report also found that whistleblowing reporting concerns in the accounting and financial services sector increased in 2021.

In fact, NAVEX’s Regional Benchmark Report found that in 2021, financial whistleblowing reporting rose by 2% to make up 7% of allegation categories in Europe. With increased financial whistleblowing reporting, it’s important that organisations plan ways to address the growing number of reports that need to be investigated and acted upon. Technology can play a critical role here in streamlining the operational process and unearthing patterns where proactive action can be taken to mitigate future concerns.

The next step

Encouraging employees to speak up in your finance business is more important than ever. With regulations catching up with reporting, not taking action to manage issues in the workplace could result in serious penalties, such as regulatory fines and reputational damage. Implementing a whistleblowing solution puts pressure on the FCA to take action on investigating reports and encourages employees across the financial services to report wrongdoing, ultimately creating an ethical culture.