Survey: Whistleblower programs aid financial compliance, but some efforts fall short

Whistleblower programs are “an important check on a firm’s compliance,” according to a survey of nearly 200 “financial services executives.”

The survey, conducted annually by the consultants at the firm Duff & Phelps, is designed to provide “a view into how firms are grappling with the constant of regulatory compliance against a backdrop of continual change.” In addition to whistleblower efforts, the study looks at anti-money laundering programs and new technology coming online for compliance and enforcement programs.

A summary reports that nearly three-quarters of respondents confirm that they have whistleblowing programs in place and 86 percent of them “at least somewhat agreeing that such programs should be mandatory.” Between one-quarter and one-third of firms feel the programs are firms are either “very” or “completely” effective.

At the same time, some are less confident in individual elements of the programs. More than one-quarter of the respondents describe their firms’ ability to evaluate the complaint and to “implement an appropriate response” to a whistleblower to be “not-at-all” effective or “somewhat” effective.

In an accompanying editorial, Hannah Rossiter, the firm’s director of compliance, writes that there are good reasons for companies to recognize the value of whistleblower programs.

Hannah Rossiter

In financial services, the potential risks posed by ineffective controls or misaligned incentives is high, and a comprehensive whistleblowing program can be an effective early warning system that allows management to get out in front of these or other problems before they become true crises, with the legal and reputational problems that follow. Indeed, recent research confirms that companies that actively use their internal reporting mechanisms face fewer material lawsuits and pay smaller settlements.

She notes that for whistleblowing program “to be a true asset, it must be operationally effective and supported by the culture of the firm.”

The survey also found a correlation between how firms rate the components of their money laundering fraud programs and how they rate their whistleblowing programs: “Effectiveness in one program correlates with effectiveness in the other.”


Global Regulatory Outlook 2019

National Whistleblower Center SEC FAQ

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