By Vanessa Docherty and Emma Burrell King & Wood Mallesons’ London office.

docherty_vFrom 7 September 2017, UK branches of Chinese banks must introduce internal policies to protect whistleblowers. In this update, we explain what changes will apply and what actions banks need to take.

Why are these changes being implemented?

In October 2015, the Financial Conduct Authority and the Prudential Regulatory Authority (the “UK Regulators”) required UK subsidiaries of banks and insurers to introduce internal procedures to protect whistleblowers.

A whistleblower is an employee of a bank who tells their employer or a UK Regulator about:

  • a criminal offence that has been committed in the UK or elsewhere;
  • a breach of that bank’s policies and procedures; or
  • behaviour that harms, or is likely to harm, that bank’s reputation or finances.

The UK Regulators want employees to feel comfortable raising concerns about bad practices within their banks without fear of personal repercussions. The UK Regulators have decided to extend parts of these whistleblower protections to employees of UK branches of overseas banks from September 2017.

What action do UK branches need to take?

UK branches need to explain to their UK employees when and how they may report concerns about a bank’s internal practices to a UK Regulator. For example, an employee may report a concern to the UK Regulator at the same time as, or instead of, reporting their concern to the bank. In addition, if a Chinese banking group includes both a UK branch and a UK subsidiary, employees of that bank’s UK branch must be able to use the more extensive whistleblowing procedures previously implemented by its UK subsidiary.

Banks need to update their employee handbook to set out these whistleblowing procedures.

Why are these changes important?

The UK Regulators take failures by banks to comply with their regulatory obligations seriously, as these failures have the potential to undermine the integrity of the UK financial system. Failures to comply with a bank’s UK regulatory obligations, including a failure to implement whistleblower protections, may lead to reputational damage, fines and licence restrictions for that bank.