KPMG response to the report on whistleblowing by the joint Parliamentary Committee on corporations and financial services – don’t expect a bounty bonanza.
Lauren Witherdin, KPMG Forensic Director said:
“The reward system that has been proposed by the Parliamentary Committee is a positive step forward – but is very different to the typical US-style bounty system, and anyone expecting a bounty bonanza may need to temper their expectations. Any reward payable under the proposed system is likely to be much more modest that the large payments we’ve seen in the US.
Firstly, the reward would be a proportion of the penalty imposed against the whistleblower’s employer, and currently the penalties here in Australia are far lower than those in the US. And secondly, the proposed system would include a ‘cap’ on the maximum reward available to a whistleblower.
The proposals cleverly retain many of the advantages of a rewards system whilst including strict criteria to be considered that will likely result in Australia avoiding many of the negative consequences attributed to a US-style system.
We believe this will result in more whistleblowers coming forward, as well as motivating organisations to take whistleblower protection more seriously and improve their internal programs.
However, we caution that care needs to be taken in the drafting of the legislation. The legislation should encourage whistleblowers to report through internal reporting mechanisms in the first instance. Bypassing internal reporting mechanisms and going direct to a regulator is not an efficient use of public resources and has the potential to actually detract from the regulators’ ability to focus on the most serious breaches. We believe that whistleblowing should continue to be primarily a public good in the first instance, and personal gain should be secondary.”
When people think of a reward system they tend to think about the US-style Dodd-Frank bounty system which provides uncapped rewards to whistleblowers and has a very broad focus. There has been heated debate about the ethical issues this type of a system would pose, the litigious culture it may create, and the concept has been deemed ‘unAustralian’ by some. KPMG has not supported a US-style bounty system, along with many of the other parties who submitted to the Inquiry.
But the reward system proposed by the Committee is a very different proposition to the US style system.
It places a cap on the reward available to a whistleblower and would require a very strict set of criteria to be considered in determining the reward payment. For example:
Other criteria that would be taken into account includes:
Any reward payable under the proposed system is likely to be much more modest that the large payments we’ve seen in the US.
First, the reward would be a proportion of the penalty imposed against the whistleblower’s employer, and currently the penalties here in Australia are far lower than those in the US.
Second, the proposes system would include a ‘cap’ on the maximum reward available to a whistleblower.
And of course, the reward would only be an option when the allegations are investigated, founded and a penalty is imposed on the wrongdoer.
KPMG operates a confidential whistleblowing service for clients. This experience informed our submission to the Parliamentary Inquiry on whistleblowing.
Other observations more broadly:
Associate Director, KPMG
T: 0400 818 891
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