Whistleblowing

Learn to act without fear

Chris Biggs asks what the case of Rihan v EY tells us about whistleblowing in accountancy.

Chris Biggs

MD, Theta Financial Reporting

EY has bolstered criticism that some firms have acted as enablers for financial misconduct. EY was found liable for covering up evidence of money laundering and forcing out a whistleblower. It was ordered to pay approximately $11 million in damages.

The case of Rihan v EY [2020] EWHC 901 was brought by Amjad Rihan, a former EY partner in Dubai, who exposed evidence of money laundering by gold refiner Kaloti Jewellery International. According to the website Inequality.org, Rihan was removed from an audit on the quality and propriety of Kaloti’s business practices when he sought to report the evidence to authorities. This has bought new questions to the accounting and auditing space about the role that whistleblowing has within the sector, and how the industry reflects on this landmark case.

The need for a new culture

Whilst many businesses work in a dynamic “open space” environment, they do not have an “open door” culture where employees are actively encouraged to voice their concerns, something that we have seen in this case. A recent survey called “Silence in the City 2” by charity Protect (see bit.ly/38l0xoT) found that 70% of those who spoke up about workplace wrongdoing were victimised, dismissed or felt forced to resign after whistleblowing. 33% of concerns raised were ignored by the employer.

The chief executive of Protect Liz Gardiner commented in the report that since the financial crisis of 2008, the manner in which so many whistleblowers continue to be ignored is particularly disappointing (see her comments in the box “A need for change”).

The ethics of whistleblowing

Ethically, it is the right thing to “blow the whistle” if someone is worried about wrongdoing in their workplace and wants to speak out about it. Professional accountants are required to abide by whistleblowing policies that are embedded in the codes of ethics and rulebooks of all major accounting bodies. These policies safeguard the credibility and integrity of the accounting profession. Whistleblowing is central to a company’s risk management policy as it protects the company from any wrongdoings whether related to fraud, breaches of laws and regulations, or professional misconduct. Recent corporate scandals are testament to the fact that poor risk management practices have irreversible consequences, such as financial losses, but also severe reputational damage. The question remains as to why developing a culture of speaking up remains a challenge for many? Well, with a third of concerns raised being ignored by employers, there needs to be more than just lip service; a major change in corporate culture is called for. This is an epidemic. In order to foster a culture of trust, employees must be able to have an off-therecord conversation with their colleagues and leaders, without fear of their concerns being dismissed or of repercussions, on a suspected case of wrongdoing.

Implementing policies

Many employees are not made aware of these policies or trained appropriately. More importantly, there is little awareness on: ● what channels of reporting are available; ● how the information will be handled (confidentiality); ● what actions will be taken to investigate; and ● how outcomes will be communicated back (transparency), especially if complaints are anonymous.

Under-documented by many businesses in this space is that the fear of repercussions for reporting is real. Although the Public Interest Disclosure Act (PIDA) 1998 makes the victimisation of a whistleblower unlawful, there are still worrying statistics that 70% of whistleblowers report they have been victimised, dismissed or forced out of their jobs. This is fundamentally wrong.

How to bring about change

So how, as a sector, can we begin to bring about cultural change? The tone set by business leaders, upper management and line

Liz Gardiner: A need for change

“We were hoping to see stronger results here and this is a real failing in whistleblowing cultures. Managers, chief executives and boards need to be the drivers of change when it comes to an improved whistleblowing culture. We were particularly sad to see that over half of whistleblowers (58%) said their reports of victimisation were also ignored by their employer. Our findings suggest that it is time to review how the whistleblowing law works and place a positive duty on employers to prevent victimisation, rather than leave it to the individual who has suffered to navigate the tribunal system. “Our research found that many whistleblowers were reporting on systemic and organisation-wide problems – which any good employer ignores at their peril. Over 90% reported through internal channels first – it is clear that whistleblowers are giving their employer a chance to put things right by speaking up, but the employer is not listening-up in response. “At Protect, we work with many financial services employers who understand the value of whistleblowing and strive for best practice in this area. We hope that the findings of ‘Silence in the City 2’ will encourage financial sector employers to review whether their arrangements are working. However, all employers need to consider what more they can do to improve their engagement with staff, make the words in their policies about protecting victims a reality and demonstrate that sanctions are taken against those who treat whistleblowers badly. Until that happens, whistleblowers will choose to be silent in the City, and we will all be the poorer for it.

“This case [Rihan v EY] has brought up a number of topics that the professional service industry must reflect upon. First and foremost, this is a reminder to all that whistleblowing is a crucial aspect of the sector and all firms must have stringent whistleblowing policies that are in place, accessible to all staff and abided by every echelon of the business. The protection offered to whistleblowers is key and must never be in any doubt. “Despite this, the facts and circumstances in whistleblowing cases are often complex in their nature and not clear cut and so there must be proper processes to report cases, utilising independent and trusted consultations. The fact that Mr Justice Kerr openly criticised EY’s integrity and ethics in this case should be a serious warning to all that strong whistleblowing policies are not only a requirement but set a precedent for open and transparent business.”

Liz Gardiner, chief executive, Protect

management has to work towards a culture of fostering trust. This includes but is not limited to the following elements: ● Reporting a concern should be normalised and not be a career defining moment. ● Leaders must give assurance that whistleblowers will be treated with respect and dignity, and listened to with empathy and objectivity. ● Leaders must encourage reporting without repercussions of victimisation or the identity of whistleblowers being revealed. ● Leaders must show determination and persistence in bringing about these changes and maintaining a positive environment.

As well as a culture, this also need to be supported by a strong written policy. A good policy is one that is clear, prescriptive and flexible about:

20

Author bio Chris Biggs specialises in advisory services addressing complex GAAP, including financial instruments, impairments, and asset finance and leasing.

Employees are empowered toblow the whistle and to do so without fear. A positive approach towhistleblowing inspires confidence between employees and leadership.”

who can report: employees but also suppliers, non-executive directors, etc.); what can be reported; anonymity and confidentiality; the method of reporting: a hotline, a dedicated Whistleblowing Champion or Compliance Officer; investigations: the procedures for dealing with concerns and whether a third-party supplier will be involved; remedial action: how and when action will be taken; feedback to whistleblowers: whistleblowers should be advised of the report unless there is a specific reason for such information to be withheld; and behaviours: encouragement of professionalism and disciplinary action for victimisation.

This has to be presented, recognised and respected by all levels of an organisation. Moreover, employees should be aware of where this policy is available and what support is available at each stage of raising a concern. As well as having a written policy, training and continuing refresher training are vital to create a team with a strong and transparent way of working and reporting. Training must cover three key areas: how to raise a concern; how staff will be protected; and how the concern will be dealt with. Employees are empowered to blow the whistle and to do so without fear. A positive approach to whistleblowing inspires confidence between employees and leadership, and is particularly appealing when it comes to attracting new talent from Generation Y. To conclude, judging by the alarming statistics and recent events, we are still a long way from bringing change in the accounting sector and in realising the fact that listening up could have averted many corporate crises. Leaders can consider success in creating a positive culture if their employees are comfortable in reporting a concern without the thought of their actions being a career defining moment. Until then, there is clearly a lot of work to do, as has been made evident by the case of Rihan v EY. ●