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An argument for a new statutory framework: where money changes hands, and a whistleblower is paid for the disclosure of information, so much is still shrouded in mystery
The government should act to put remunerated whistleblower arrangements on a statutory footing as a matter of urgency. The present absence of accountability and transparency is wholly unacceptable, and inimical to the rule of law.
In many instances, a whistleblower acts pursuant to a statutory duty to make a disclosure, and no payment is involved. A typical example is the duty imposed on a person working in the regulated sector to make a suspicious activity report under the anti-money laundering regime set out in Part 7 of the Proceeds of Crime Act 2002. There are multiple other cases, such as the duty on an authorised person to disclose market abuse to the Financial Conduct Authority, and the professional obligation on a barrister or solicitor to report an instance of wrongdoing to the Bar Standards Board or the Solicitors Regulatory Authority, as the case may be. There are equivalent obligations in the health sector.
But where money changes hands, and a whistleblower is paid for the disclosure of information, different considerations arise.
The purchase of information by HM Revenue and Customs is a paradigm case. For centuries, the Board of Inland Revenue has made ex gratia payments to whistleblowers for receipt of information about tax evasion, but the details are shrouded in mystery.
In answer to a Freedom of Information Act request by the author, HMRC has said that the amount of money paid to whistleblowers between 1 January 2017 and 31 December 2017 and 1 January 2018 and 31 December 2018 was £421,460 and £343,500 respectively. However, when asked for the number of whistleblowers to whom these payments were made, the answer was withheld on the basis that the information was exempt from disclosure because it was likely to endanger the safety of an individual.
It is difficult to see how the publication of a number can fall into this category, but either way, the fact remains that it is not known whether the payments relate to a small number of large payments, or many small payments. HMRC’s reticence is curious since it recognised in its response that: ‘[T]he public interest in disclosure of this information supports the need for government departments to be transparent and accountable for spending public money, in order that the public can understand, scrutinise and challenge where such funds are going and judge whether they are getting value for money, or whether such spending is ethical or justified.’
In fact, members of the public, and lawyers who advise them, have very little visibility in this area. There is so much which is unknown. In respect of which taxes were payments made? How many payments were made to organised criminals registered as covert intelligence sources for information about VAT carousel frauds, and how many whistleblowers were disgruntled employees or domestic partners selling information about hidden offshore accounts or corporate false invoicing arrangements? What criteria did HMRC apply when deciding whether to make a reward, and when doing so, how did it calculate the amount? Is it a percentage of tax recovered, or a flat fee? On how many occasions did HMRC require a whistleblower to make a witness statement as a condition of receiving a payment? Perhaps most importantly of all, how much evaded tax has been recovered as a result of these payments having been made? There is no information regarding any of these matters published in an annual report to Parliament, and from the perspective of a person considering the making of disclosure, there is no Code of Practice to give any indication as to how HMRC is likely to respond to an approach.
If HMRC wishes to encourage whistleblowers to divulge information regarding tax evasion, it is elementary that better safeguards are required. A written agreement between HMRC and the whistleblower needs to be drawn up, so that both sides can be clear on their respective expectations. There is no reason why HMRC could not establish a Code of Practice, with a template agreement, to this effect.
It is also difficult to discover information about payments to whistleblowers by other public authorities. In response to a request seeking information about payments made by the Metropolitan Police, the Constabularies and the National Crime Agency, the Home Office confirmed it does not record this information. It suggests these are operational matters for the individual public authorities. This means that information is not held centrally and posits the possibility that divergent criteria may be applied by different authorities, in different parts of England and Wales.
The response of the Serious Fraud Office was more opaque. In response to a FOI request asking about payments to whistleblowers and informants, the SFO responded that it ‘could neither confirm nor deny that the information… is held by the SFO’. Moreover, ‘[T]his [response] should not be taken as an indication that the information is, or is not, held’. Like HMRC, the SFO is concerned that release of the baseline figures would prejudice the public interest. Really? Surely, members of the public are entitled to know if the SFO is making ex gratia payments, and if so, in how many cases, applying what criteria and what is the cost/benefit analysis of these arrangements.
As it happens, a little more information is available about payments to whistleblowers by the investigating authorities. In February 2017, the Guardian reported that BBC Radio 5 Live had asked 45 UK police forces to state how much they spent on whistleblowers. The 43 forces that responded collectively spent £19.59 million. After the Metropolitan Police, the second highest payer was the Police Service of Northern Ireland, which paid out nearly £2 million. Only two other forces, Kent police and West Midlands police, spent more than £1 million in the last five years.
The fundamental point remains. Large sums of public money are expended by investigating authorities in circumstances where it is not known whether these payments are based on rationally defensible criteria. There is a total absence of accountability, transparency and, potentially, legality, in this regard. Apart from anything else, without clear rules on the principles to be applied, whistleblowers cannot possibly know where they stand in their dealings with the public authorities.
There is a much broader issue at stake. If there is a public interest in the investigating authorities making payments to whistleblowers for valuable information in criminal cases, it raises the question as to whether there is scope for greater whistleblowing involvement in civil proceedings.
In modern times, English law has moved away from the approach in the United States whereby a whistleblower who assists in civil recovery of criminal property can receive all or part of any penalty imposed (a ‘qui tam’ action). The writ fell into disuse in England following the Common Informers Act 1951. A few years ago, consideration by the Home Office of its reintroduction was not greeted with any enthusiasm.
There may be a more elegant model for the reintroduction into English law of whistleblower participation in civil claims. The NCA, along with other investigatory authorities such as the SFO, has been empowered in Part 5 of the Proceeds of Crime Act 2002 to initiate civil proceedings in the High Court to recover property obtained by unlawful conduct. Consideration should be given to enabling whistleblowers to be financially rewarded in circumstances where they are able to initiate, or assist in, the successful pursuit of a civil recovery claim. In this event, the basis of their participation would need to be acknowledged in a formally drawn agreement, made with the investigatory authority in an accountable and transparent way.
Other important developments are currently taking place. In July 2018, an All-Party Parliamentary Group was established on Whistleblowing, with an agenda to examine the effectiveness of the Public Interest Disclosure Act 1998 and how it might be improved. There have been high profile instances in the financial sector where extensive company resources have been deployed to discover the identity of a whistleblower, and where a whistleblower has been penalised for making disclosures and found it exceptionally difficult to find alternative employment.
The adverse consequences for a whistleblower can be enormous. If the whistleblower finds it impossible to continue in an employed role, the impact can be devastating. Friendships are severed, and the degree of anxiety, even psychological trauma, can be immense. Financially rewarding a whistleblower gives some support, and sometimes greater assistance is required.
The All-Party Parliamentary Group on Whistleblowing should not confine itself to an evaluation of the Public Interest Disclosure Act. A wider review of the place of remunerated whistleblowers in English law is required, with an urgent requirement for a new whistleblower legislative framework to ensure that full accountability and transparency is introduced.
Jonathan Fisher QC is in dual capacity practice at Red Lion Chambers and Bright Line Law. He specialises in financial crime and corporate crime cases.
© iStockphoto/wildpixel/yorkfoto
Jonathan Fisher KC practises at Red Lion Chambers London. Additionally, he is a Senior Fellow (and Visiting Professor in Practice) at LSE. In October 2023, the Home Office appointed Jonathan to act as Independent Reviewer in Disclosure and Fraud Offences. This is a part-time role which Jonathan principally conducts from chambers.
The government should act to put remunerated whistleblower arrangements on a statutory footing as a matter of urgency. The present absence of accountability and transparency is wholly unacceptable, and inimical to the rule of law.
In many instances, a whistleblower acts pursuant to a statutory duty to make a disclosure, and no payment is involved. A typical example is the duty imposed on a person working in the regulated sector to make a suspicious activity report under the anti-money laundering regime set out in Part 7 of the Proceeds of Crime Act 2002. There are multiple other cases, such as the duty on an authorised person to disclose market abuse to the Financial Conduct Authority, and the professional obligation on a barrister or solicitor to report an instance of wrongdoing to the Bar Standards Board or the Solicitors Regulatory Authority, as the case may be. There are equivalent obligations in the health sector.
But where money changes hands, and a whistleblower is paid for the disclosure of information, different considerations arise.
The purchase of information by HM Revenue and Customs is a paradigm case. For centuries, the Board of Inland Revenue has made ex gratia payments to whistleblowers for receipt of information about tax evasion, but the details are shrouded in mystery.
In answer to a Freedom of Information Act request by the author, HMRC has said that the amount of money paid to whistleblowers between 1 January 2017 and 31 December 2017 and 1 January 2018 and 31 December 2018 was £421,460 and £343,500 respectively. However, when asked for the number of whistleblowers to whom these payments were made, the answer was withheld on the basis that the information was exempt from disclosure because it was likely to endanger the safety of an individual.
It is difficult to see how the publication of a number can fall into this category, but either way, the fact remains that it is not known whether the payments relate to a small number of large payments, or many small payments. HMRC’s reticence is curious since it recognised in its response that: ‘[T]he public interest in disclosure of this information supports the need for government departments to be transparent and accountable for spending public money, in order that the public can understand, scrutinise and challenge where such funds are going and judge whether they are getting value for money, or whether such spending is ethical or justified.’
In fact, members of the public, and lawyers who advise them, have very little visibility in this area. There is so much which is unknown. In respect of which taxes were payments made? How many payments were made to organised criminals registered as covert intelligence sources for information about VAT carousel frauds, and how many whistleblowers were disgruntled employees or domestic partners selling information about hidden offshore accounts or corporate false invoicing arrangements? What criteria did HMRC apply when deciding whether to make a reward, and when doing so, how did it calculate the amount? Is it a percentage of tax recovered, or a flat fee? On how many occasions did HMRC require a whistleblower to make a witness statement as a condition of receiving a payment? Perhaps most importantly of all, how much evaded tax has been recovered as a result of these payments having been made? There is no information regarding any of these matters published in an annual report to Parliament, and from the perspective of a person considering the making of disclosure, there is no Code of Practice to give any indication as to how HMRC is likely to respond to an approach.
If HMRC wishes to encourage whistleblowers to divulge information regarding tax evasion, it is elementary that better safeguards are required. A written agreement between HMRC and the whistleblower needs to be drawn up, so that both sides can be clear on their respective expectations. There is no reason why HMRC could not establish a Code of Practice, with a template agreement, to this effect.
It is also difficult to discover information about payments to whistleblowers by other public authorities. In response to a request seeking information about payments made by the Metropolitan Police, the Constabularies and the National Crime Agency, the Home Office confirmed it does not record this information. It suggests these are operational matters for the individual public authorities. This means that information is not held centrally and posits the possibility that divergent criteria may be applied by different authorities, in different parts of England and Wales.
The response of the Serious Fraud Office was more opaque. In response to a FOI request asking about payments to whistleblowers and informants, the SFO responded that it ‘could neither confirm nor deny that the information… is held by the SFO’. Moreover, ‘[T]his [response] should not be taken as an indication that the information is, or is not, held’. Like HMRC, the SFO is concerned that release of the baseline figures would prejudice the public interest. Really? Surely, members of the public are entitled to know if the SFO is making ex gratia payments, and if so, in how many cases, applying what criteria and what is the cost/benefit analysis of these arrangements.
As it happens, a little more information is available about payments to whistleblowers by the investigating authorities. In February 2017, the Guardian reported that BBC Radio 5 Live had asked 45 UK police forces to state how much they spent on whistleblowers. The 43 forces that responded collectively spent £19.59 million. After the Metropolitan Police, the second highest payer was the Police Service of Northern Ireland, which paid out nearly £2 million. Only two other forces, Kent police and West Midlands police, spent more than £1 million in the last five years.
The fundamental point remains. Large sums of public money are expended by investigating authorities in circumstances where it is not known whether these payments are based on rationally defensible criteria. There is a total absence of accountability, transparency and, potentially, legality, in this regard. Apart from anything else, without clear rules on the principles to be applied, whistleblowers cannot possibly know where they stand in their dealings with the public authorities.
There is a much broader issue at stake. If there is a public interest in the investigating authorities making payments to whistleblowers for valuable information in criminal cases, it raises the question as to whether there is scope for greater whistleblowing involvement in civil proceedings.
In modern times, English law has moved away from the approach in the United States whereby a whistleblower who assists in civil recovery of criminal property can receive all or part of any penalty imposed (a ‘qui tam’ action). The writ fell into disuse in England following the Common Informers Act 1951. A few years ago, consideration by the Home Office of its reintroduction was not greeted with any enthusiasm.
There may be a more elegant model for the reintroduction into English law of whistleblower participation in civil claims. The NCA, along with other investigatory authorities such as the SFO, has been empowered in Part 5 of the Proceeds of Crime Act 2002 to initiate civil proceedings in the High Court to recover property obtained by unlawful conduct. Consideration should be given to enabling whistleblowers to be financially rewarded in circumstances where they are able to initiate, or assist in, the successful pursuit of a civil recovery claim. In this event, the basis of their participation would need to be acknowledged in a formally drawn agreement, made with the investigatory authority in an accountable and transparent way.
Other important developments are currently taking place. In July 2018, an All-Party Parliamentary Group was established on Whistleblowing, with an agenda to examine the effectiveness of the Public Interest Disclosure Act 1998 and how it might be improved. There have been high profile instances in the financial sector where extensive company resources have been deployed to discover the identity of a whistleblower, and where a whistleblower has been penalised for making disclosures and found it exceptionally difficult to find alternative employment.
The adverse consequences for a whistleblower can be enormous. If the whistleblower finds it impossible to continue in an employed role, the impact can be devastating. Friendships are severed, and the degree of anxiety, even psychological trauma, can be immense. Financially rewarding a whistleblower gives some support, and sometimes greater assistance is required.
The All-Party Parliamentary Group on Whistleblowing should not confine itself to an evaluation of the Public Interest Disclosure Act. A wider review of the place of remunerated whistleblowers in English law is required, with an urgent requirement for a new whistleblower legislative framework to ensure that full accountability and transparency is introduced.
Jonathan Fisher QC is in dual capacity practice at Red Lion Chambers and Bright Line Law. He specialises in financial crime and corporate crime cases.
© iStockphoto/wildpixel/yorkfoto
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