The UK government has opened a consultation on the whistleblowing framework and a proposed Serious Fraud Office financial incentives scheme for individuals who report economic crimes.
Under the proposed incentive scheme, individuals could be eligible for a financial reward regardless of where they are located or where the information originated, provided they meet the scheme’s eligibility criteria.
The SFO is developing proposals for the scheme, which would reward people who provide information about economic crime to the SFO. The aim is to encourage more people to come forward with information, strengthening the SFO’s ability to investigate and prosecute serious fraud, bribery and corruption.
Such schemes already operate in a range of countries, including the United States and Canada.
Evidence, including RUSI’s 2024 report, suggests that such schemes increase the quantity and quality of reporting of corporate misconduct, such as fraud, bribery and money laundering. These offences can be difficult for law enforcement agencies and regulators to detect because they are often complex and hidden.
Incentivisation schemes also recognise the significant personal, professional and financial risks that whistleblowers may face when reporting wrongdoing. In addition, the prospect of employees or agents reporting misconduct for a financial reward may strengthen incentives for companies to identify and self-report wrongdoing at an early stage.
Most whistleblower reward schemes operate by paying whistleblowers a percentage of the funds recovered as a result of the information they provided. They typically specify a reward range, often between 10% and 30%, and do not impose a cap on the value of rewards. Some jurisdictions impose limits, however. For example, the Ontario Securities Commission caps rewards at CAD $5 million.
In the UK, HMRC has recently launched its Strengthened Reward Scheme for individuals who report serious tax avoidance or evasion. Under this scheme, an individual whose information leads to the collection of at least £1.5 million in tax may receive a reward of up to 30% of the tax collected, excluding penalties and interest. Although payments remain discretionary, there is no cap on the size of the reward.
The government suggests that rewards should be calculated as a percentage of the financial penalty or fine imposed on a company, similar to the approach taken by schemes in the US and HMRC’s Strengthened Reward Scheme. A specified percentage range would be set, with the exact reward determined according to a range of factors.
These factors could include the value of the information to the case, the whistleblower’s level of cooperation, how promptly the information was reported, any complicity in the criminality being reported and the relative significance against other information that contributed to the enforcement outcome.
In addition, a government consultation will explore whether current guidance on the types of wrongdoing that may be disclosed is sufficient, whether the existing categories of wrongdoing are sufficient to cover disclosures relating to risks arising from AI technologies, and whether reform is required to encourage employers to have whistleblowing policies and procedures in place.
Alun Milford criminal litigation partner at Kingsley Napley and a former general counsel at the SFO, commented: "The fact the government has launched this consultation is a significant step after years of closed thinking on the topic on a cross party basis. That this exercise is being launched within a week of the SFO director job spec going live is also pertinent and encouraging for the SFO.
"Whilst there is much to consider in shaping any potential UK based financial incentive scheme for those who whistleblow on economic crime, from the SFO’s perspective it is a step forward that the government is now at least willing to ask the question of whether we should have such a scheme.
"This may well not be as controversial as the proposal to abolish jury trials for fraud cases and, if at the end of the consultation exercise the government decides to progress the incentive idea, its huge majority should allow it to do so.
"If that is the way it chooses to go, our concern will be about fair trial safeguards."
Ian Hargreaves, partner at Quillon Law, said: "While the consultation is a welcome step forward, the question of whether whistleblowers should be financially rewarded remains divisive. There are mixed views on how effective such incentives will be, with some arguing it is morally problematic to encourage people to blow the whistle for financial reward. The argument is that it should be a public and social duty, without the need to be paid. However, whistleblowers must also be protected against retaliation or more sinister treatment, which is covered to an extent under employment legislation, although arguably not as effectively as it should be.
"This was strongly pushed by the former director of the SFO, Nick Ephgrave, who was keen to introduce an enhanced statutory whistleblowing scheme offering financial incentives. The SFO has been in limbo since his departure, with a caretaker Director in place pending a new appointment. Ephgrave must be pleased to see this news, notwithstanding that it is only a consultation at present.
"The UK government will almost certainly look at whistleblowing models in other jurisdictions, such as the US. There is also a substantial body of research on the issue, so I doubt this will be a quick process or one that fails to raise strongly opposing views."
Lloyd Firth, partner at WilmerHale, commented: “It is worth remembering why the SFO has been calling for the introduction of a whistleblower reward scheme. It is for intelligence, not evidence. Although some whistleblowers may go on to become co-operating witnesses and give evidence, many will not. Their primary value is their inside track information, which can materially improve the speed and effectiveness of a criminal investigation. With an insider's knowledge, investigators know what to look for and where to look for it, who to speak to, and what to ask.”
Nick Barnard, partner at Corker Binning, added: “It may come as a surprise that the first question in a consultation on financial incentives for whistleblower is not whether whistleblowers ought to be offered financial incentives. However, given the twin tailwinds of Government commitment to implementing the Fisher Review and the SFO’s stated objective to boost its proactive intelligence gathering abilities, it was inevitable that the question would be framed as ‘how’ rather than ‘if’.
“By and large, the actual questions posed - should the payouts be funded from the corporate penalty? Should the SFO be required to report on the scheme? Should the reward be split where there is more than one whistleblower? – are side-issues compared to the bigger questions that will determine the success or failure of any such scheme.
“For example, no reference is made to the perceived ‘cultural aversion’ to paying witnesses in UK, and so no questions invite suggestions as to how that might be overcome. Similarly, the challenge of potential bad-faith or low-quality reports is only touched on by an arguable no-brainer as to whether it should be a criminal offence to knowingly submit false or misleading information.
“Whilst there is something to be said for having the conviction to see an idea through to implementation, the light-touch of this consultation may turn out to be a missed opportunity to address some of the challenges that any whistleblower scheme will face.”
