Australia has expanded its whistleblowing provisions

As a sport loving society, we are so accustomed to seeing the umpire or referee blow their whistle to rectify the transgression of one player against another or a breach of the rules of a game of sport. Yet in our professional lives the concept of ‘blowing the whistle’ doesn’t seem to hold the same allure and for some compelling reasons.

Whistleblowing is defined by Transparency International as “the disclosure of information related to corrupt, illegal, fraudulent or hazardous activities (including perceived or potential wrongdoing) being committed in or by public or private sector organisations  – which are of concern to or threaten the public interest – to individuals or entities believed to be able to effect action.”

One fact remains, effective whistleblowing is essential in fostering integrity and accountability while deterring and exposing misconduct, fraud and corruption”.

There are remarkable whistleblower stories such as the story of Toni Hoffman, an Australian nurse who exposed, through a whistleblower program, the medical malpractice of surgeon Jayant Patel. As a result, Hoffman received the 2006 Australian of the Year Local Hero Award and an Order of Australia Medal for her role as a whistleblower.  While there are several positive examples of whistleblowers in Australia, such as the story of Toni Hoffman, Australia’s whistleblower protection laws have long been criticised for leaving whistleblowers feeling vulnerable rather than protected.

Having been involved in a large number of investigations where whistleblower information has led to the discovery of significant fraud, corruption and in one case abuse, it has always concerned us that whistleblower protections are often inadequate and expose the whistleblower to potential fallout resulting from the investigation. In one case, the whisteblower, a Government executive, had their employment terminated on the spot because of their disclosure.

This is especially so in the private sector where protections are limited. In one case, we had to recommend a private sector whistleblower be placed under protective surveillance for a period of time, costing the client significantly.  However, change is on the horizon.

Following the passage of the Treasury Laws Amendment (Enhancing Whistleblowers Protections) Bill 2018 (Whistleblower Bill) through Parliament on 19 February 2019, new Federal whistleblower legislation was enacted on 19 March 2019. After modification on 4 April 2019, the new legislation took effect on 1 July 2019.

Amendments to other legislation

The new whistleblower legislation amends and enhances the:

  • Corporations Act 2001 to consolidate and broaden the existing protections and remedies for corporate and financial sector whistleblowers
  • Taxation Administration Act 1953 to create a whistleblower protection regime for disclosures of information by individuals regarding breaches of the tax law or misconduct relating to an entity’s tax affairs, and
  • Banking Act 1959, Insurance Act 1973, Life Insurance Act 1995 and Superannuation Industry (Supervision) Act 1993 to make consequential amendments.1

The whistleblowing provisions in the Banking Act 1959, the Insurance Act 1973, the Life Insurance Act 1995 and the Superannuation Industry (Supervision) Act 1993 have been repealed, and replaced by the new provisions in the Corporations Act.

Key features of the new whistleblower regime

Key features of the new whistleblower regime include, but are not limited to:

  • The new legislation expands whistleblower protections regarding all Australian companies and gives public and large proprietary Australian companies until 1 January 2020 to introduce a whistleblower policy that is compliant with the new legislation, or else companies may face fines of up to $12,600
  • The new legislation has increased penalties for breaches of whistleblower protections, reaching up to $10.5million
  • It includes a requirement that the whistleblower has objectively reasonable grounds to suspect wrongdoing
  • Victimisation and compensation provisions apply to protected disclosures made at any time
  • Disclosures may now be made anonymously
  • It extends the criteria of wrongdoing that qualifies for protection and sets out who is eligible for whistleblower protection. This expands to employees (current and former), officers, suppliers and their employees, an individual who is an associate of the entity, and family members of any of these eligible people, and
  • It excludes disclosures of personal work-related grievances from the protected disclosures.

The importance of whistleblowing in the workplace

Whistleblowers are an important source to detect cases of fraud and misconduct in the workplace and they often provide pivotal evidence for a successful prosecution.  By promoting a whistleblowing culture, the company encourages transparency and integrity in the workplace.

However, in practice, there are limitations to having anonymous disclosures given that the information can be dismissed by virtue of perceived unreliability. In some cases, the information provided is too broad or ambiguous such that investigating the disclosure would require following up the whistleblower. This can be challenging or even impossible in some cases if the company has no means of contacting the person directly to provide additional information regarding the disclosure.  This is why having a sound whistleblower program in place is extremely important to ensure that all disclosures can be properly investigated whilst protecting the anonymity of the person.

What does it mean for your business?

Companies should update their respective policies to reflect the significant changes made to Australia’s whistleblower legislation prior to the 1 January 2020 deadline. Under the new legislation, all public companies and large proprietary companies must have a policy containing:

  1. Information about the protections available to whistleblowers
  2. How the company will ensure fair treatment of employees who are mentioned in whistleblower disclosures, and
  3. Any matters prescribed by regulation.
This policy must be made available to all people who may be eligible whistleblowers in relation to the company. This requirement applies to all public companies and all proprietary companies that have become large proprietary companies for any financial year on any day in any later financial year that is at least six months after the last day of the first financial year. For example, companies with 30 June year-ends would need to have policies in place by 1 January 2020 and those with 31 December year-ends by 1 July 2020.

In addition, whistleblowers must know where, how, when to report; and that their identity as a whistleblower will be kept confidential. Raising awareness of the importance of whistleblowers can promote a ’speak up’ culture and de-stigmatise the disclosure of wrongdoing.  Therefore, businesses will need to implement comprehensive training across the organisation to ensure that whistleblower protections are recognised and dealt with upmost confidentially. 

More information and assistance

For information about how BDO can assist you with implementing these changes, please contact Adam Simms, Partner - Forensic Services.

Adam

Adam Simms

Partner, Forensic Services

Sydney

+61 2 8264 6538

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