Research suggests that paying whistleblowers works — is a UK consultation imminent?

On 10 December 2024, the Royal United Services Institute (RUSI) published research by Eliza Lockhart,¹ which found that financially rewarding whistleblowers could, with appropriate safeguards, increase the effectiveness of economic crime investigations.

At a launch event held the same day at RUSI, Nick Ephgrave QPM, Director of the Serious Fraud Office (SFO), threw his weight behind paying whistleblowers, arguing that the research provides an "unanswerable" case for reform to stop the "brain drain" of intelligence from the UK to the US.²

In this article, we summarise RUSI's findings, the SFO’s and Financial Conduct Authority’s (FCA) stance on rewarding whistleblowers, and areas and issues to be considered in any future government consultation.

Background to RUSI research

The US operates a number of reward programmes targeting economic crime whistleblowers.³ The most well-known US programme is run by the Securities and Exchange Commission (SEC), which has awarded more than $2.2 billion to 444 whistleblowers since its inception in 2011.⁴

The UK has historically been resistant to rewarding whistleblowers. The only schemes currently in operation are those run by the Competition and Markets Authority (CMA) for reporting illegal cartel activity⁵ and a little-publicised scheme by HM Revenue & Customs (HMRC) which reportedly paid out £509,000 in 2023 for reports on tax fraud.⁶

Lockhart's research assessed the evidence of the impact of whistleblower reward programmes in the US and Canada and evaluated it against commonly held concerns in the UK and Australia about such schemes.

Report findings and observations

Lockhart's research found that whistleblower reward programmes: 

• Increase both the quantity and quality of information received. In FY 2023, the SEC received 18,354 tips and the Commodity Futures Trading Commission (CFTC) received 1,530 – a record for both regulators and an increase of almost 50% on the amount of whistleblower tips received in previous years.
• Can have significant deterrent effect (as they result in an increase in successful enforcement actions) and strengthen internal compliance systems by increasing internal as well as external rates of whistleblowing.

The paper concludes with four key observations for countries considering the introduction of rewards for economic crime whistleblowers: 

1. Rewards achieve certain goals, but not in isolation: Reward schemes must be combined with other protections to be effective. Such protections include statutory anti-retaliation provisions and strict confidentiality limits on when regulators can disclose a whistleblower's identity. Reward programmes must also be combined with a proactive and empowered regulator who acts on reports and imposes penalties for retaliatory behaviour. Of particular importance is establishing an efficient Office of the Whistleblower (OWB) within the relevant regulator (to process submissions, refer tips, determine rewards and drive communication and engagement).
2. Consult to customise: The paper recommends that policymakers in the UK and Australia consult broadly on the design of any schemes, including how reward programmes will interact with current whistleblower frameworks and other relevant legislative schemes (such as the assisting offender regime).
3. Prioritise the message, not the messenger: A key theme of the paper is that North American reward programmes prioritise the significance of a whistleblower's information over their motivation for reporting. A shift is therefore necessary in jurisdictions such as the UK to move away from an altruistic attitude that whistleblowers should simply 'do the right thing' towards a heightened focus on intelligence gathering.
4. Ongoing progress, not immediate perfection: Reward programmes should be continuously monitored and adapted. The paper recommends starting small and building incrementally, noting that a successful pilot programme could reshape political and cultural attitudes.

SFO and FCA stance

Since first announcing his support for paying whistleblowers in February 2024, Ephgrave has made it a consistent theme of his tenure. On 10 December, he noted that 86% of fines and settlements in the US in 2022 originated with whistleblowing, whereas in the SFO this figure was 5%. Ephgrave sees whistleblowers as "key holders" who can unlock a case and save resources and time. He also hit back at outdated arguments that it is 'not British' to pay whistleblowers, noting that payments have long been made to criminal informants in the UK.

The FCA – which in 2014 published a paper⁷ outlining its strong opposition to financial incentives for whistleblowers – has been more circumspect. Nikhil Rathi, FCA Chief Executive, said in an article published on 7 December 2024 that it would be “highly countercultural” for the UK to go as far as the US in paying large sums for information; however, in a departure from the FCA’s earlier stance, he said that he was “not in principle opposed to” the idea of remunerating whistleblowers.⁸ His comments come against a backdrop of recent criticisms over the FCA's handling of whistleblowers, including an incident where FCA Chair Ashley Alder (who was later cleared of wrongdoing) was accused of breaching whistleblower confidentiality.

Government consultation on the horizon

The key question is: what next? 

Lockhart's research strongly recommends a consultation process to gain the views of relevant stakeholders and build a programme fit for purpose in the UK.

There are a number of thorny issues which will need to be considered in any consultation, including:

• Does such a regime require legislative change and how will it interact with current protections under the Public Interest Disclosure Act 1998 (PIDA)?
• Should the definition of eligible whistleblowers be widened to include anyone with relevant information and not just the narrow range of persons currently covered under PIDA?
• What type of resolutions should trigger an award? Should they include confiscation, deferred prosecutions agreements, forfeiture and civil recovery orders?
• How should the UK's protections for confidentiality and anti-retaliation be enhanced to ensure that rewards work alongside a strengthened whistleblowing framework?
• Should each regulator operating a reward scheme have an OWB (as recommended by the Lockhart report) or should there be one overarching OWB (as currently proposed in the draft Whistleblowing Bill)?
• Should complicit insiders (who often, as noted in Lockhart's research, have the most valuable information) qualify as whistleblowers? Ephgrave's recent comments⁹ suggest that he does not envisage the scheme extending to culpable insiders, but where and how to draw the line between people who are and are not implicated will require close consideration.
• How will the whistleblowing regime interact with the assisting offender regime? Will there, for example, be cleansing and debriefing processes built in?
• What happens if whistleblowers are required to give evidence? A far higher percentage of cases go to trial in the UK than the US (where many more people reach plea deals in light of high sentences for economic crimes). In particular, how will the disclosure regime under the Criminal Procedure and Investigations Act 1996 apply to information relating to whistleblowers, particularly if they are required to give evidence in criminal trials? How does that fit with any provisions granting whistleblowers confidentiality?

The differences in the UK system mean that a 'cut and paste' from the US approach would not work. Any government consultation must consider the cultural and legal context of the UK and how North American reward schemes can be adapted to be most effective in the UK — otherwise the danger is that they will founder. As Lockhart's paper warns, a swiftly unwound whistleblower reward programme may do more harm than good.¹⁰