An illustration of a person is tied up in red rope as they try to blow a whistle
Anti-Money Laundering

Why people are afraid to blow the whistle

A look at how the ethical and responsible act of whistleblowing isn’t the likeliest option for many business professionals

Sherron Watkins, a name that resonates with the infamous Enron scandal, was not always in the spotlight. She started her career at Arthur Andersen, and joined the once-prominent energy and commodities company as vice-president in 1993.  However, her tenure was not without its challenges. Throughout her tenure, she noticed discrepancies in the company’s financial reporting. The concerns reached a tipping point in mid-2001, when she alerted CEO Kenneth Lay to the accounting irregularities within the company through a memo, warning that Enron was on the brink of a wave of accounting scandals.

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The memo led to internal investigations and Enron’s eventual demise, costing its staff and investors. The backlash against Watkins was swift. Her peers called her a “snitch.” Watkins’ career, reputation and livelihood were at stake. 

Over 20 years since the scandal unfolded, little has changed: Whistleblowers still fear coming forward about fraudulent activities at their company. Recent data from accounts payable and fraud detection software company Medius found 56 per cent of financial professionals in the United States and the United Kingdom have either spotted or suspected internal fraud at their companies. Yet, a staggering 81 per cent of these professionals remained silent, with 45 per cent of said respondents citing fear of recrimination.   

Over 90 per cent of workers polled in the report would’ve felt more comfortable flagging suspicious activity with more evidence, but almost half (48 per cent) said there just aren’t enough legal protections for whistleblowers in the United States and United Kingdom for them to feel comfortable coming forward, underscoring the urgent need for improved cultural and legal safeguards—both in the United States and United Kingdom., as well as Canada.

“The research that we’ve looked at over the years actually tells us that people are aware that those are serious threats to them for whistleblowing,” says Michele Wood-Tweel, vice-president of regulatory affairs at CPA Canada. According to the report, some of the more tangible consequences of whistleblowing include being left out of key company decisions, being moved to a different team and being called derogatory names. “Whistleblowers tend to have the capacity to report on things like fraud in a much greater capacity than many other traditional mechanisms that we use as checks and balances,” says Tweel. “Here in Canada, we’ve under-recognized that value by not having put in place the right kinds of legislative and regulatory mechanisms to support whistleblowing and whistleblower protection in organizations writ large.”

Tweel points out that the United Kingdom has a Public Interest Disclosure Act, a comprehensive piece of legislation that has been in place for years to protect whistleblowers in the public and private sectors. “In Canada, there are discrete pieces of legislation, but at a far lesser degree,” says Tweel. “We’ve got a proverbial patchwork quilt evolving in Canada, where there’s a piece [of legislation] over here, and then there’s a piece over there.” Under Canada’s Bank Act, the Financial Consumer Agency of Canada has a designated whistleblower program for those who work at Canadian banks and credit unions.

The issue with this, Tweel points out, is that there are gaps in protections due to the multi-jurisdictional legislative landscape for whistleblowers — one that’s not comprehensive enough. “If there’s a federal piece of legislation that provides you with protection, it won’t help you at all if you’re being sued civilly in a provincial jurisdiction.” Without a clear, comprehensive legal framework, Tweel is concerned that whistleblowers won’t bother coming forward with their concerns. What’s more, Tweel points to the need for companies to have a whistleblower culture that is rooted in promoting ethical and responsible business, without professional or personal repercussions to those who come forward. 

The lack of a comprehensive framework also has economic costs. C.D. Howe estimates that between $100 billion CAD and $130 billion CAD is laundered every year in Canada, putting the country’s financial system at risk—and costing tax-abiding citizens and companies. 

Tweel believes CPAs have a role in AML whistleblower protection. “Professional accountants can promote ethical and responsible business in organizations, whether those are private or public, including having a place to channel those concerns to be able to report them with confidence and without fear of reprisal — and then to protect whistleblowers when it happens.”

In the Medius report, Watkins said that when someone attempts to sound the alarm on corporate wrongdoing, “the pathway is uncharted, things happen organically.” 

“When you think of her comment, to say the pathway is uncharted, that is part of the problem, and it’s unsettling for somebody that’s already been through it to be still observing that,” says Tweel. “That just shows you how much further we need to go [on whistleblower protection].”