In October 2019, the European Parliament passed a landmark Whistleblowing Directive instructing European Union (EU) countries to enact greater protections by shielding whistleblowers from retaliation and creating “safe channels” to report violations of the law. This Directive is the first effort to create a common minimum whistleblower standard across the EU.
Before the passage of this Directive, whistleblower laws were handled by the 27 individual member states, 13 of which currently do not have any law in place. For those that do have existing whistleblower laws, they are generally weak and missing key components for whistleblower protections. The Netherlands, for example, passed the Whistleblowers Authority Act in 2016 which created a House for Whistleblowers where public and private sector employees could report wrongdoing. This law, however, is not comprehensive as it lacks (1) penalties for employers who retaliate against whistleblowers, (2) provisions to reinstate a whistleblower, and (3) compensation for financial loss due to whistleblowing.
The need for stronger whistleblower laws was highlighted by a series of scandals such as the Panama Papers, Cambridge Analytica, and Danske Bank, in all of which whistleblowers played a key role in bringing wrongdoing to a light. Additionally, in 2017, the European Commission released a report estimating the EU lost between EUR 5.8 billion to 9.6 billion (US $6.4 to $10.7 billion dollars) in public procurement alone due to the lack of whistleblower protections across the EU.
Now, all EU states are required to transpose the Whistleblowing Directive into their national law by December 17, 2021. For countries such as Austria, Spain, Denmark, and Greece, this means enacting the first whistleblower laws within their countries. For those who have existing laws such as the Netherlands, France, and Hungary, they will need to strengthen their laws in order for them to meet the standard of the Whistleblowing Directive.
The National Whistleblower Center (NWC) has been closely involved in advocating for the existence and implementation of the Whistleblowing Directive. The initial drafts proposed in 2018 would have led to completely ineffective protections, requiring whistleblowers to report internally and thus forcing the sharing of incriminating information with those perpetrating crimes.
In two letters addressed to the Presidents of the European Parliament and the European Commission, NWC explained the grave risks that come with internal reporting requirements. NWC argued that type of language “undermines the rule of law, violates international anti-corruption conventions, [and] violates U.S. securities laws applicable to numerous European companies.” Additionally, in November 2018, Stephen M. Kohn, then Executive Director and now Chairman of the Board, testified before the European Parliament. Among other things, Kohn’s testimony exposed efforts to create a loophole for those committing tax law violations. NWC also joined a coalition of 80 international organizations calling for the European Council and the Member States to remove the mandatory internal reporting regime.
Fortunately, the final directive contains no tax loophole and ensures that whistleblowers are permitted to report wrongdoing to outside authorities. However, there is still ambiguity in the requirements that could potentially leave whistleblowers unprotected. To ensure each EU country’s whistleblower law is robust and effective, in September 2020, NWC, partnered with the international whistleblower law firm Kohn, Kohn & Colapinto, LLP, wrote to each member country providing guidance and recommendations which include:
- Expanding whistleblower protections to cover disclosures permitted under international anticorruption conventions signed by Member States;
- Adopting language and procedures that have proven effective in protecting whistleblowers when implementing Articles 6-7, 11, 14-16, 19-21, and 23-24;
- Narrowly interpreting Article 22 in order to ensure that whistleblowers are not chilled from making disclosures and their confidentiality is maintained;
- Enacting whistleblower reward laws to combat specific legal violations, including foreign bribery, money laundering, tax evasion, government procurement fraud, and ocean pollution.
In March 2021, a coalition of anti-corruption advocates, including NWC, also wrote letters to each member country urging the parliaments to explicitly recognize climate whistleblowers in their transposition of the Directive. The letters note that as climate change issues impact a wide spectrum of laws, rules, and regulations, which are constantly evolving, these parliaments must enact provisions that are flexible enough to cover this developing area.
Educating Potential Whistleblowers in the European Union
As one of the largest consumer markets in the world, as well as the base of operations for many companies, the potential for fraud in the European Union is high. That’s why the National Whistleblower Center is working to educate company insiders and others in the EU about how they can confidentially disclose information about illegal activities to authorities and qualify for financial awards under U.S. and other laws.
One current educational campaign is centered around improving prosecutions for violators of the International Convention for the Prevention of Pollution from Ships, otherwise known as MARPOL. MARPOL is the main international convention covering prevention of pollution of the marine environment by ships from operational or accidental causes. With a few exceptions, MARPOL enforcement in Europe is massively underachieving in terms of the number of investigations and prosecutions of illegal ship discharges, the level of criminal civil penalties for violators, and reporting of pollution data. Enormous volumes of ship waste are unaccounted for, suggesting it is being dumped overboard while at sea – but with the ships often deep in international waters, this is hard to prove. Whistleblowers on these ships are in the best position to expose crimes.
Education surrounding accounting and money laundering fraud are another focal point for NWC in Europe. In 2013, Howard Wilkinson, a former employee of Danske Bank, confidentially raised concerns over an illegal money laundering scheme with billions of dollars reportedly flowing from Russia and other former Soviet states, through Estonia and to major banks such as Deutsche Bank and JP Morgan. This case has been under international investigation and continues to this day. Mr. Wilkinson is represented by NWC founder and Chairman of the Board, Stephen Kohn.
In 2012, Bradley Birkenfeld, another whistleblower represented by NWC founder Stephen Kohn, made history when he obtained the largest whistleblower reward ever given to an individual whistleblower for reporting tax fraud to the U.S. Internal Revenue Service (IRS). Mr. Birkenfeld was the first international banker to blow the whistle on illegal offshore accounts held in Switzerland by U.S. citizens. His disclosures resulted in recoveries of $780 million dollars in civil fines and penalties and over $5 billion dollars in collections from U.S. taxpayers who held illegal accounts. The Swiss government was forced to change its tax treaty with the United States in order to turn over names of more than 4900 American taxpayers who held these accounts.
By educating members of the European Union about their rights under whistleblowing laws, those with information regarding financial fraud may be more inclined to step forward and disclose this information to authorities. However, European whistleblowers do not need to wait until the Whistleblowing Directive takes effect on December 17, 2021 to be covered under law. Currently, thousands of non-U.S. citizens are taking advantages of U.S. whistleblower laws such as the Dodd-Frank Act, Foreign Corrupt Practices Act, and False Claims Act to make disclosures regarding violations of tax fraud, ocean pollution, securities violations, accounting fraud, and more. You can learn more about guidance for whistleblowers outside the U.S. here.