Syed Rahman and Ulrich Schmidt consider the measures and their possible effect
The UK government is bringing in statutory protections for employees who blow the whistle on misconduct relating to sanctions.
Measures come into force on June 26 that will establish legal protections for those who tell HM Treasury about breaches of the Sanctions and Anti-Money Laundering Act. The amendments will also give protection to staff who report violations of trade sanctions to the Department for Business and Trade or breaches of aircraft and shipping sanctions to the Department of Transport.
The changes to the Public Interest Disclosure (Prescribed Persons) Order 2014 establish the types of reports that will be protected and the agencies that a whistleblower should be contacting about their concerns.
The changes will mean that whistleblowers sacked because of a protected sanctions-related disclosure will be entitled to compensation for having been unfairly dismissed. Sanctions whistleblowers will also be protected against any “detrimental actions” by their employer. This was defined in a 2022 appeal judgement as any kind of treatment that may lead a reasonable worker to “take the view that in all the circumstances it [the treatment] was to his detriment”.
Widen
The UK government had made it clear that it wanted to widen the Public Interest Disclosure Order to include disclosures made to “relevant government departments in relation to financial, transport and certain trade sanctions”. Its stance comes after a review of the UK’s civil sanctions regime that was published last month.
These new measures have been introduced with the aim of encouraging more reporting to the various UK agencies with jurisdiction over sanctions offences. But it remains to be seen if that proves to be the case.
The evolving nature and complexity of sanctions regulations may make staff with suspicions of sanctions breaches wary of coming forward for fear of having made a mistake. In addition, the underhanded nature of most sanctions evasion makes it unlikely that many employees would correctly identify it, let alone report it.
The European Union has a facility for people to make anonymous reports of suspected sanctions evasion, which are then passed to the relevant agency. The UK may have greater success in encouraging sanctions-related whistleblowing if it introduced such an approach.
There is also the issue of what resources can be put into investigating such reports. There have been just two convictions for breaching sanctions (and they were in the same case) since the flurry of sanctions introduced after Russia’s invasion of Ukraine in 2022. While some financial penalties have been imposed, the track record of holding sanctions evaders to account may be of little encouragement to whistleblowers.
Policy shift
In hindsight, it is easy to criticise the government for not putting these protections into place earlier. However, these changes are a sign of a clear policy shift to enhance sanctions enforcement. This policy shift itself is a result of the geopolitical events of the past years and, as such, we should refrain from being too critical in this regard.
OFSI strongly encourages companies to voluntarily self-disclose suspected breaches of sanctions. This was, at least partially, done because there is an overwhelming amount of information and investigation to be undertaken by OFSI. If companies self-report, this greatly contributes to a smoother procedure. Stronger protection for whistleblowers indicates a recognition that not all companies will readily self-report - and encourages employees to disclose non-compliance directly to the authorities.
A huge potential weakness, however, is the lack of incentives that are offered to potential whistleblowers. The US, for example, has long appreciated and recognised the value of whistleblowers in tackling all aspects of economic crime. It offers financial rewards to whistleblowers, which has increased the quantity and quality of the information received by the authorities. This, in turn, has a deterrence effect on companies who may otherwise not pay too much attention to sanctions compliance.
The UK refraining from offering financial incentives to sanctions whistleblowers means that the only reason a whistleblower would come forward is out of a sense of civic duty. But this ignores the reality that whistleblowing can, in some situations, be a career ending decision.
