Wheatley examines potential for US-style whistleblower incentives

Financial Conduct Authority chief executive-designate Martin Wheatley has opened the door to paying large US-style cash incentives to financial whistleblowers.

Speaking to the Parliamentary Commission on Banking Standards last week, Wheatley said he is studying the US system closely and could make changes in the UK.

Under US financial regulatory reforms financial whistle blowers will be incentivised to come clean by keeping 20 per cent to 30 per cent of the proceeds of any crime successfully prosecuted.

Wheatley says: “We are absolutely interested in it. We have spoken to the US authorities and are looking very carefully at it but it is too early to make a judgement yet. They haven’t brought a successful prosecution based on whistle blowing yet but one is at an advanced stage. There is more time needed whether that system works well.

“The key difference to us is the incentive structure. Under our system it is a moral incentive to do the right thing whereas the US system operates a financial incentive and there are some pros and cons to both.”

The FSA receives up to 4,000 whistle blowing reports every year with 12 per cent then pursued as “actionable intelligence”.

FSA chairman Lord Adair Turner said the Libor rigging scandal has highlighted the crucial role whistleblowers can play in exposing corruption.

He says: “None of the authorities around the world independently knew it was going on. We began by looking at lowballing rumours and then as a by-product we discovered trader manipulation.

“I don’t think we could ever have known about it with a supervisor in every trading room. How big would a police force need to be to spot every crime that occurs?

“One of the few mechanisms available is whistle blowing so we need to think more deeply about it than in the past.”

Wheatley highlighted cases of whistleblowing over benchmark manipulation and potentially fraudulent products that have been pursued.