Publish in Perspectives - Wednesday, May 10, 2017
Whistleblowing is not yet widely recognized as a tool for combating corruption across all of Latin America, experts say. (Photo: OIG/US Government)
Whistleblowing legislation still in its infancy, but moving in the right direction.
BY LATIN AMERICA ADVISOR
Last year, Mexico enacted sweeping changes to the country’s anti-corruption regime, including new whistleblower protections for individuals. Also last year, Argentine authorities extended special benefits to whistleblowers, such as reducing the length of prison sentences, when they report certain types of public corruption. What is the state of whistleblower laws in Latin America and the Caribbean? Are such laws effective ways to encourage reporting corruption and allowing people to speak up when they see wrongdoing? What best practices in protecting whistleblowers need to be replicated, and what flaws in the system should be corrected? Should whistleblowing laws apply differently to the public and private sectors?
Raquel Florez, global investigations partner, and John Warren, senior associate, at Freshfields Bruckhaus Deringer: Whistleblowing is not yet widely recognized as a tool for combating corruption across all of Latin America and the Caribbean; there are substantial regional disparities regarding the level of protection afforded whistleblowers. Nonetheless, some countries are taking steps to promote whistleblowing. For example, Colombia’s country statement for the 2016 Anti-Corruption Summit in London included a commitment to draft a Whistleblower Protection Bill. These legislative reforms are likely to gain momentum, as they are consistent with global trends in anti-corruption enforcement. (…) There is growing recognition that cooperation from those with knowledge of alleged corruption schemes is vital for enforcement efforts, which has been exemplified by the frequent use of leniency agreements in recent high-profile corruption prosecutions. A natural next step is to expand beyond encouraging individual defendants to share information to encouraging third-party whistleblowers to come forward. Passing supportive legislation is a necessary, but not sufficient, step for promoting whistleblowing: it is also important to remove obstacles—such as fear of retaliation— that provide practical barriers to whistleblowing. Safeguards to protect whistleblowers complemented by public outreach and the encouragement of corporate awareness and training can help ensure better awareness of reporting mechanisms and accompanying legal protections.
Perhaps unsurprisingly, most existing whistleblower laws in the region target the public sector. Public and private sector corruption are, however, often overlapping and mutually reinforcing, for example in relation to public procurement. Best practice would include instituting an overarching culture of compliance and vigilance spanning both sectors.
Julissa Reynoso, partner, and Luis Paternina, international associate, at Chadbourne & Parke: In recent years, a number of countries in Latin America have included whistleblower protections for individuals in their new anti-bribery legislation. Last year alone, Argentina and Mexico, two Latin American countries that received low marks from Transparency International’s Corruption Perceptions Index, enacted such protections. Nonetheless, there are a number of countries that have not joined this bandwagon or have done so only in a limited way.
Where these laws have been enacted, their effectiveness in promoting whistleblowing is disputed. For instance, there have been concerns that Brazil’s whistleblower protections, which were passed in August 2013, have been inadequate. Given the suspicion of governments in the region, more might need to be done to turn paper rights into practical results. To be effective, whistleblower laws and policies should protect whistleblowers from retaliation (i.e. blacklisting, unjustified termination, reduction of pay or prospects of promotion) and incentivize disclosures through offers of financial rewards or immunity from prosecution. These protections and incentives should be available in equal measure to members of the public and private sector so as to ensure that corporations and governments are not defrauded.
Whistleblower laws should also be drafted to be as clear and understandable to members of both the public and private sector as possible, as they can only be truly effective if individuals know and understand that such an option is available to them. Ultimately, a broader adoption of such legislation in Latin America and the Caribbean should mutually reduce corporate and governmental corruption, increase trust amongst trade partners and foster economic growth.
Gene Smith, president and CEO of Smith Brandon International: Let’s be practical: whistleblower protection is a step in the right direction. Too many business communities across the Americas follow the tradition-honored rule of ‘that’s how we’ve always done it.’ To break some of those hidebound rules and practices, which may include pay-offs or kickbacks, concrete measures have to be defined, set up and implemented. Complications immediately arise when considering the whistleblower: who is this person? What is his or her background, and does that include access to information disclosed? What about motive, which could be interest in best practices, concern for the common good, commitment to principles of corporate governance or professional or personal ax-grinding? A soft-landing should be available to the informant who has the fortitude to step forward, who will be forced to adjust to a separate bureaucracy—where the oversight agency and law enforcement may speak a different language and move at an unknown pace, sometimes eager and sometimes reluctant to proceed. That soft-landing should allow for anonymity, at least to some degree; an identified point of contact, to stop the bureaucratic shuffle and the repetition or duplication of reporting; and some legal status that allows for a personal remedy for the whistleblower, who may be betrayed by the system. Mexico has taken steps to protect its whistleblowers with major new legislation, including the establishment of an independent prosecutor. Argentina and Brazil have reduced penalties for whistleblowers who assist in anti-corruption cases. Some new laws may be beneficial; some may need to be tweaked over time. All provisions for whistleblower protection would benefit from review and comparison on what is working and what is not. Meanwhile, a good starting point might be a recent study (2014) on ‘Whistleblower Protection Laws in G20 Countries’ and its call for ‘Priorities for Action’ (sponsored by Blueprint for Free Speech, among others).
Alejandro Salas, Americas director at Transparency International: Whistleblowing legislation in Latin America and the Caribbean is still in its infancy, though it’s moving in the right direction. As grand corruption scandals across the region continue to make the headlines in the region and dominate the day-to-day of our public life, the importance of blowing the whistle on corruption has become a priority. Legislation needs to reflect the realities of society and public life. It is increasingly understood that whistleblowers play an essential role in exposing corruption, fraud, mismanagement and other wrongdoing that threaten the rule of law. By disclosing misdeeds, whistleblowers have helped save countless lives and billions of dollars in public funds, while preventing emerging scandals and disasters from worsening. But laws have to be properly written, as well as implemented, in order to be effective in encouraging people to speak up when they see wrongdoing. Let’s not forget that whistleblowers often take on high personal risk. They may be fi red, sued, blacklisted, arrested, threatened or, in the worst cases, assaulted or killed. Protecting them from such retaliation is essential, while also enhancing openness and accountability in government and corporate workplaces.
I’ve met a couple of these brave whistleblowers from both Brazil and Venezuela. Because there was no legal or institutional infrastructure to support them, what they did came at the very high personal cost of affecting their family life. We should not expect everyone to be a hero and sacrifice themselves. It should be a right of citizens to report wrongdoing.
All people should have the inherent right to protect the well-being of other citizens and society at large. The absence of effective protection can therefore pose a dilemma for whistleblowers: they are often expected to report corruption and other crimes, but doing so can expose them to retaliation. To help, Transparency International has developed some principles that serve as guidance for formulating new and improving existing whistleblower legislation: 1) accessible and reliable channels to report wrongdoing; 2) robust protection from all forms of retaliation; and 3) mechanisms for disclosures that promote reforms that correct legislative, policy or procedural inadequacies, and prevent future wrongdoing.
Morgan Miller, partner, and Bryan Parr, of counsel, in the Investigations and White Collar Defense practice at Paul Hastings: Laws providing protections for whistleblowers, and that ensure private actors do the same, are critical to ensuring effective compliance, particularly in the context of anticorruption regimes. The challenge is to find the right mix, and types, of carrots and sticks to incentivize true whistleblowers.
While certainly they are steps in the right direction, by offering to spare the rod, both the Mexico and Argentina reforms communicate an approach quite different from the U.S. Securities and Exchange Commission’s frequent press releases about significant monetary rewards. By presuming there is a penalty to be reduced, such measures necessarily target those without clean hands, who are technically not whistleblowers at all and reliability may negatively impact the information they report.
Whether possible reductions and leniency will also incentivize the casual bystander or good citizen to step into, voluntarily and pro-actively, a regime with that default presumption remains to be seen. In the meantime, the SEC’s Office of the Whistleblower, aided by the U.S. plaintiffs’ bar, will continue to expand the awareness of its payouts—and receive reports from around the world. That said, Lava Jato in Brazil—and successful criminal prosecutions around the world—in large part owe their success to flipping one wrongdoer against another, which Mexico’s and Argentina’s reforms appear poised to facilitate. Ultimately, throughout Latin America (and elsewhere), the challenge is to ensure that relevant groups see both that the protections are working effectively, and that the incentives provide actual, meaningful rewards, to society as a whole and to whistleblowers individually.