New FCA whistleblowing regulations are part of a wide-ranging set of anti-corruption measures taken by the UK in an effort to rid the British banking sector of so-called 'dirty money'.
Financial institutions which take deposits and have assets of more than £250 million – consisting of banks, building societies and credit unions – as well as regulated insurance companies are covered by the rules. Other firms are not bound by the rules but are expected to observe them as guidance.
The new rules were drawn up after a succession of financial scandals, including the attempted manipulation of the Libor rate by foreign exchange traders at Barclays. The bank was fined £290 million in 2012 for the attempt to regulate the market. The following year, a committee of MPs recommended that new rules be brought in to protect whistleblowers, making it easier for them to come forward. It is hoped that the new approach might prevent similar scandals, if staff feel more confident in raising concerns.
The new regulations mean that from September next year, all the financial institutions covered will need to have:
The new rules mean that Britain will finally join other developed countries with a framework that protects whistleblowers in law, such as the US, where whistleblower protection has been enshrined in law since changes to the False Claims Act in 1986.
In the most recent case brought under US legislation, a former employee of Abbott Laboratories was awarded $1 million out of a total settlement of $9 million in a case brought against America's second-largest nursing home pharmacy, PharMerica Corp. The employee had blown the whistle and accused PharMerica of soliciting and receiving kickbacks from Abbott in exchange for promoting the prescription drug Depakote for nursing home patients.
A spokesman for the FCA said: "These rules aim to encourage a culture where individuals feel able to raise concerns and challenge poor practice and behavior," and the legislation seems to be effective. In the year ending April 2015, there were more than 1,300 complaints from whistleblowers, which was more than a quarter higher than the year before and a ten-fold increase on 2008.
Tracey McDermott, acting FCA chief executive, said: "For individuals to have the confidence to come forward, it is vital that firms have in place adequate policies on dealing with whistleblowers and that a senior manager takes responsibility for overseeing these policies.
"These rules are designed to build on and formalise examples of good practice already found in parts of the financial services industry."
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