Assessing the compliance of existing policies with the Whistleblower Directive: an institutional case study
Most financial institutions have already implemented internal policies to address whistleblowing. However, the Directive raises expectations and companies will necessarily have to challenge themselves and make substantive internal changes in order to be truly compliant. The market would not be ready if the Directive was implemented today.
We recently examined the existing policies of selected Luxembourg regulated financial institutions using only public data sources. Of the available policies, only one was fully compliant with the Whistleblower Directive’s requirements. This significant finding demonstrates that even companies with extensive existing policies will need to update their internal procedures. A breakdown of the areas which require improvement for compliance, as well as their explanation is provided below. Firms should review these findings against current policies to determine the scale of change which is required.
Third parties who have dealt with the company are eligible to whistleblow under the Whistleblower Directive.
The Whistleblower Directive requires that either an oral or written channel of reporting is available as well as in-person reporting.
The Whistleblower Directive requires a particular protocol to be followed upon the receipt of a report.
The Whistleblower Directive specifies a protocol which must be taken to follow-up with whistleblowers after steps are taken internally to rectify a situation.
Evaluating an Existing Policy: A Case Study
The following table contains a breakdown of the existing whistleblowing policy of a Luxembourg bank which was developed in response to CSSF Circular 12/522.
This case study demonstrates that existing policies will require substantial changes to comply with the Whistleblower Directive and highlights best practices.
Other pitfalls to avoid
Lack of Receipt Procedure
There was no procedure to reply to a whistleblower following a report. The Whistleblower Directive requires that this should happen within seven days.
Lack of Auditing Procedure
There was no internal audit procedure to ensure the effectiveness of whistleblowing protocols. While not required by the Whistleblower Directive, this could be important to ensuring program success and avoiding external reporting. For financial institutions in Luxembourg subject to CSSF Circular 12/552, there is a generic requirement to review all policies regularly, however, a specific audit procedure would ensure a more comprehensive review.
Lack of Routine Training
While not explicitly provided for in the Whistleblower Directive, routine training should be conducted to ensure that employees are and remain familiar with the system.
Michael SchweigerLocal Partner Attorney at law / Solicitor
Michael Schweiger, local partner, is a member of the Banking & Finance practice group in our Luxembourg office. He leads the Luxembourg financial regulatory team and regularly advises banks, e-money and payment institutions, insurers, and other clients regarding financial regulation.T: +352 466 230 520 E: firstname.lastname@example.org
Adrien PierreSenior Associate Attorney at law / Avocat à la Cour
Adrien Pierre, senior associate, is a member of the Banking & Finance Practice Group in our Luxembourg office. He advises banks, asset managers, fintechs, payment institutions, insurance companies and other financial institutions on regulatory matters.T: +352 466 230 523 E: email@example.com