Preparing for the New Zealand Protected Disclosures (Protection of Whistleblowers) Act – Update #1

We begin this article with a summary of some recent important changes to New Zealand’s Whistleblowing regime.

Protected Disclosures (Protection of Whistleblowers) Bill

On 24 June 2020, The Minister of State Services, Chris Hipkins, introduced a Bill that will strengthen protections for whistleblowers.

The Bill replaces the Protected Disclosures Act 2000. This Bill clarifies the definition of serious wrongdoing, enables people to report serious wrongdoing directly to an appropriate authority at any time, strengthens protections for disclosers, clarifies the internal procedure requirements for public sector organisations, and the potential forms of adverse conduct disclosers may face.

As defined in the publication itself, the Bill is informed by reviews and extensive (including public) consultation as conducted in late 2018. The public consultation highlighted four broad problems that require changes to the current Act including:

  • both organisations and disclosers are confused about when to use the Act;
  • disclosers are unclear about how to make a disclosure internally, and some organisations are also unclear about how to respond;
  • it is hard for disclosers to navigate the system for reporting concerns externally; and
  • disclosers fear speaking up because they lack confidence in the protections available to them.

In order to address these problems, the Bill:

  • clarifies the definition of serious wrongdoing and extends its application to cover private sector use of public funds and authority;
  • enables people to report serious wrongdoing directly to an appropriate authority at any time, provides more clarity about appropriate authorities, and clarifies the ability of those authorities to decline or refer the disclosure;
  • strengthens protections for disclosers by specifying what a receiver of a disclosure should do;
  • clarifies the internal procedure requirements for public sector organisations and requires them to state how they will provide support in the form of practical assistance and advice to disclosers; and
  • clarifies the potential forms of adverse conduct disclosers may face.

Serious Wrongdoing

Clause 10 of the Bill defines serious wrongdoing. The current definition speaks of unlawful, corrupt, or irregular use of a public sector organisation’s funds or resources.

The first change is to widen the definition to include private sector bodies using public funds or resources.

The second change is to catch oppressive, improperly discriminatory, or grossly negligent conduct or gross mismanagement by those either performing or acting on behalf of a public sector organisation. Currently, that sort of behaviour is caught only if it is by public officials. This change has the effect of including private sector bodies who are fulfilling public functions, duties, or powers.

Bill Submissions

The Bill is currently at the Select Committee stage, and there are now only four days left for the public to make further submissions (28 Jan 2021 NZ Time).

Recent Whistleblower Surveys

We conclude this article by highlighting several themes arising from two recent Whistleblower surveys.

ACFE – Report to the Nations, 2020 Global Study on Occupational Fraud and Abuse

As the title suggests, this report focuses on Occupational Fraud and Abuse, which comprises three categories including Corruption, Asset Misappropriation and Financial Statement Fraud. The Association of Certified Fraud Examiners survey includes 2,504 cases across 125 countries, causing a total loss of more than $3.6 Billion (USD).

According to the survey, the typical fraudster has the following characteristics:

  • The longer the tenure the bigger the fraud they commit
  • Males committed more frauds than females
  • Those with a degree or higher are more likely to be commit fraud
  • The amount of loss suffered increases in line with the age of the perpetrator.

Whistleblowing typically ranks as the Number 1 mechanism to detect occupational fraud and abuse. This remains the case in 2020, and as seen here, by a long margin. 

Given these statistics showing that employees are responsible for the largest source of whistleblowing tip offs, it follows that an organisation should ensure it has in place not only policies and procedures, but also a formal disclosure platform that protects them to a high standard, regardless of whether they wish to remain anonymous or otherwise.

The majority of employees are honest hard working individuals who will have the best interests of their employer at heart and who should be encouraged by sound policies and procedures to maintain the integrity of the organisation by being able to ‘safely‘ report any misconduct or wrongdoing involving the organisation they are employed by.

Freshfields – Whistleblowing survey 2020, Whistleblowing in the spotlight

Another similar survey goes beyond Fraud, addressing a wider view of Whistleblowing. The international law firm Freshfields Bruckhaus Deringer LLP surveyed over 2500 individuals across 13 industries in the UK, US, Hong Kong, Germany and France to assess their attitudes towards whistleblowing. This survey was last published in 2017.

This survey is arranged into nine themes. In this article, we summarise the ‘perceived risks and benefits of whistleblowing’.

According to the report, the majority of respondents saw benefits to their organisation of having in place a whistleblowing procedure, with 51% saying that it would help to identify problems in the organisation at an early stage and 45% saying that they thought employees would be more likely to raise their concerns internally if a whistleblowing procedure was in place.

Employees also perceive some risks in relation to their employers’ whistleblowing procedures. The focus is no longer on the impact on internal colleague relationships but on the company and its reputation as a whole.

The percentage of those who considered that a whistleblowing procedure undermines trust between colleagues decreased from 37% in 2017, to 29% in 2020. 

There has been a significant increase in those who were concerned that whistleblowing procedures increased exposure of the firm and individuals at the firm to enforcement action, rising from only 9% in 2017 to 21% in 2020. 

Freshfields conclude there is a heightened awareness of the potential consequences of whistleblowing, perhaps due to high profile global corporate scandals (whistleblowing related or not) leading to regulatory action, in particular within the financial services sector.

In our next update, we will review the factors that influence how your Whistleblower Platform should be configured.