ADGM publishes Guiding Principles on Whistleblowing

Introduction

On 6 December 2022, the Abu Dhabi Global Market (“ADGM”) published its “Guiding Principles on Whistleblowing” (the “Guidance”), setting out aims, objectives and best practice for its 55,000 registered companies to consider as part of their own whistleblowing frameworks.

Mr Emmanuel Givanakis, the CEO of the Financial Services Regulatory Authority (“FSRA”) of the ADGM, described the purpose of the Guidance as being to encourage “…all ADGM entities to review and align their own whistleblowing programs in line with these guidelines”. [1] In doing so, the ADGM and the FSRA are continuing to highlight their message that transparency and corporate accountability are hallmarks of good governance and risk management.

The Guidance comes nine months after the Dubai Financial Services Authority (“DFSA”) published its own Whistleblowing Regime, [2] which made changes to the DIFC Regulatory Law 2004 to enhance legal protection to whistleblowers under its jurisdiction in the Dubai International Financial Centre. It also follows the introduction by the UAE Central Bank in 2021 of a whistleblowing portal to allow employees and external stakeholders to report concerns around misconduct by any of the Central Bank’s employees or contractors. [3]

Unlike the DFSA’s Whistleblowing Regime, the FSRA have opted against issuing legally binding provisions and instead intends for the Guidance to complement the ADGM’s existing regulatory framework. However, given the level of detail in the Guidance it can only be concluded that the FSRA are serious about firms implementing a strong and effective whistleblowing framework. Indeed, the Guidance sets out that circumstances may exist where it is appropriate for the FSRA to consider the extent to which an ADGM entity has conducted its activities in line with the provisions set out therein. A straightforward situation where this may arise is at the time of the imposition of a financial penalty, where a lack of an effective whistleblowing framework could be considered an aggravating factor by the FSRA. Such an approach would be consistent with the DFSA’s decision to include a firm’s treatment of a whistleblower as a factor when deciding on the imposition of any penalty. [4]

The Guidance itself is split into six principles, covering factors now internationally accepted as core to any effective whistleblowing framework. The following is a brief look at some of the key components of each principle, highlighting some of the pertinent issues to be considered by firms when reviewing or setting up their own whistleblowing framework.

Principle 1 - Guiding Definition of Whistleblowing

The ADGM has encouraged firms them to adopt a broad definition of whistleblowing and sets out the standard types of misconduct that would be expected to be included, such as breaches of regulatory requirements and types of financial crime. Interestingly, the Guidance goes further than the DFSA Regime by proposing the rather less easily defined “unethical conduct” as conduct that may fall within a firm’s definition of whistleblowing. All egregious conduct is likely to fall under the heading of “unethical”, but firms must exercise caution when defining it to avoid the risk of employees conflating their subjective personal opinions of general conduct with the serious misconduct the firm is looking to flag as part of its whistleblowing framework.

In a similar fashion, while the Guidance draws firms’ attention to the fact that whistleblowing should be treated distinct from an employee grievance or customer complaint, it omits to highlight the nuanced situations where these can overlap. Firms will need to be aware of situations where an employee grievance contains a combination of HR and whistleblowing issues and have the procedures in place to deal with each separately and appropriately.

Principle 2 – Non Retaliation

The Guidance makes the salient observation that whistleblowers are unlikely to raise concerns if in doing so they open themselves up to retaliation. Common types of retaliation are helpfully set out in the Guidance for firms and their HR departments to be aware of. Of particular note is the acknowledgement that detriment can extend to more discreet forms of treatment such as a change or threat to change a whistleblower’s hours of work. While such conduct is often considered by tribunals in employment disputes, it is less often listed as form of retaliation that would engage protection under a firm’s whistleblowing framework and is therefore a welcome and progressive addition to the Guidance.

Principle 3 - Confidentiality and Due Process

One of the cornerstones to any successful and effective whistleblowing framework is the ability to protect the identity of the whistleblower, or the information they have provided, from unauthorised access. The Guidance provides strong advice on this topic, while also linking the preservation of the confidentiality of subjects of whistleblowing reports to the objective of reducing the risk of retaliation. This double-sided benefit of confidentiality is often overlooked by firms.

In terms of anonymity, the Guidance notes that global best practice accommodates receiving reports from whistleblowers who wish to remain anonymous. However, it also links the impact of an anonymous report to the ability to conduct a thorough investigation. This needs to be considered carefully by firms. There is no doubt most investigations will benefit from dialogue with the whistleblower, but there are many examples of cases where the initial whistleblowing report is more than sufficient for an investigation into the alleged misconduct to take place, with no further questions or verification of the whistleblower required. The Guidance also omits reference to practical possibility of communicating with an anonymous whistleblower without the need to have identified them first (for example, depending on the circumstances, using aliases and neutral email addresses). The more firms do to encourage and enable whistleblowing, in whatever form, the more confident their employees (and regulator) will be in their whistleblowing framework.

Principles 4 & 5 – Good Faith & Components of a Whistleblowing Framework

Of course, for the unscrupulous or aggrieved, a whistleblowing report presents an attractive opportunity to point the finger at an adversary. Such a report, with no proper basis in truth, is an abuse of the whistleblowing framework and the Guidance highlights the need to ensure that the protections apply only to reports made in “good faith”.1 The underlying principle is that at the time the report was made it was done so based on an honest belief that the information was accurate. This means that whistleblowers who make inaccurate reports based on a genuine misunderstanding are still protected.

The Guidance warns that whistleblowing reports made exclusively in self-interest will not be protected. Implicit in that assertion is an acknowledgement that self-interest can be a factor in a genuine whistleblowing report, if not the only reason (for example, if the whistleblower will likely benefit from the target of the report having their employment terminated, or are themselves facing disciplinary action).

These can be complex issues to distinguish, and the Guidance advises firms to ensure that those assessing and managing whistleblowing reports involve “appropriately independent skilled professionals”. This may not be straightforward for some firms, with limited budgets and resources making training and relative independence difficult. However, any such issues are surmountable with the drafting and implementation of a proportionate and effective whistleblowing framework. The Guidance sets out useful information on how small businesses can integrate such a framework in their ethics and employment contracts and sets out the minimum issues to be addressed. These include internal and external channels for reporting misconduct and information raising among employees.

Principe 6 – Culture

Last, but not least, the Guidance turns to the importance of the “tone from the top” in ensuring an organisational culture of trust and transparency is realised in firms through their whistleblowing frameworks.

This is likely to be the area that the FSRA begin to target firms on. As the financial services sector has experienced with anti-money laundering compliance, a beautiful set of considered policies and frameworks mean little to regulators if in practice they are not effectively implemented. The Guidance assists firms by providing examples of an inappropriate culture (under-resourcing, low responsiveness to reports, inappropriate involvement of management) to checks and balances that can be adopted to improve the culture, including oversight from a Board of Directors. Ultimately, the more engaged senior management are the more effective the whistleblowing framework is likely to be.

Conclusion

The Guidance is a welcome addition to the growing body of regulatory oversight of whistleblowing in the UAE, which in turn forms part of the broader growth in financial services regulation and enforcement. They also comprise of the most detailed information on whistleblowing frameworks available to firms in the UAE and could sensibly be used by firms outside of the ADGM as a guide when seeking to implement their own whistleblowing policies and procedures.

The fact that the Guidance is not legally binding is no indicator of the impact they may have, particularly given the recent increase in enforcement activity and fines imposed by the FSRA. In terms of impact, it is likely that the absence of an effective whistleblowing framework will be considered a serious aggravating factor in future enforcement action. Firms ignore this at their peril.

1 ADGM Media Announcement, 8 December 2022, available at https://www.adgm.com/media/announcements/adgm-introduces-guiding-principles-on-whistleblowing

2 DFSA Publications, https://www.dfsa.ae/your-resources/publications-reports/explainers/dfsas-whistleblowing-regime

3 Central Bank of the UAE https://eservices.centralbank.ae/wb/

4 RPP Penalty Guidance 6-5-8 (m) at https://dfsaen.thomsonreuters.com/rulebook/rpp-6-5-8-0