New EU whistleblower directive also affects Swiss companies

Public awareness of the term "whistleblowing" was really raised by the events surrounding Julian Assange, the founder of Wikileaks. Among other things, alleged war crimes and corruption were revealed via this platform. The Internet, in particular social media, has already been used on various occasions to disclose insider information - in some cases with unforeseeable consequences. Even if compliance violations, unfair and illegal machinations or other irregularities at the workplace should not be tolerated, but uncovered and punished accordingly, such an "open channel" as the Internet is conceivably ill-suited. Both whistleblowers and the organizations concerned are exposed to major reputational risks. In order to better protect both addressees and whistleblowers themselves, the new EU Whistleblower Directive will come into force on December 17, 2021. This regulation obliges companies with 250 employees or more or EUR 10 million in annual sales to have an anonymous whistleblower system. From 2023, the limit will be lowered again, to 50 employees.

EU Whistleblower Directive: Pressure on Swiss Companies Grows

But who in Switzerland protects an employee who, for example, wants to inform his employer that a colleague is secretly downloading pedosexual content from the Internet or that field staff are systematically "fudging" expense claims in their favor? A bill on "protection in the event of reporting irregularities in the workplace" failed in the National Council last year. This leaves the dilemma facing an employee who knows about irregularities: on the one hand, there is the violation of applicable law by his employer; on the other hand, there is his duty of loyalty to that same employer. Nevertheless, pressure is growing on Switzerland to provide whistleblowers with adequate protection. This now applies in particular to companies with international business activities in the EU area: they, too, will be obliged to provide an anonymous and GDPR-compliant reporting option as of December 17, 2021.

In order to ensure uniform standards, a professional and anonymous whistleblowing system is also recommended in this country. "The aim of such a whistleblowing system is to provide whistleblowers with sufficient protection to avoid risks in connection with compliance violations and to position the company as an exemplary and transparent employer in terms of employer branding," explains Thomas Wittkopf, Managing Director of TELAG AG. This company already provides a holistic whistleblowing system for large corporations and SMEs under the name WhistleTAG.

Anonymous reporting system

The EU Whistleblower Directive stipulates that whistleblowers must be offered the opportunity to make their report electronically via an encrypted online system as well as verbally by telephone, but in any case anonymously and securely. "Whistleblower confidentiality must be ensured so that employees have the courage to report a compliance violation in the first place. In practice, we often experience that it is particularly difficult for employees in SMEs, which pride themselves on their open corporate culture, to point out a malpractice. They are afraid of the consequences - starting with disparagement, to mobbing, to far-reaching retaliation. That's why, in most cases, they refrain from reporting." With devastating consequences, as the ACFE Report proves it: The average financial loss amounts to CHF 200,000 - not including the damage to the company's reputation. "Managing directors and boards of directors have a responsibility, but are often in the dark because employees lack the basis to report a malpractice due to inadequate protection. A professional whistleblowing system offers companies an opportunity for transparency and practiced corporate governance both internally and externally," says Thomas Wittkopf.

Corporate compliance makes sense

In Switzerland, a compliance function is required by law for banks and securities dealers. But in other industries as well, more and more companies, regardless of their size, are recognizing compliance as an integral part of good corporate governance. An effective compliance concept outlines the compliance issues that are central to the company in question and defines the compliance risks. It also regulates reporting to the company management and the board of directors. Last but not least, it also includes a concrete compliance organization, including a reporting system for problem cases. Such an anonymous whistleblowing system ensures that companies can detect compliance violations at an early stage and identify general violations of laws or internal rules. In addition, the processes are continuously and objectively checked for their effectiveness and optimized so that appropriate measures can be taken effectively. According to the 2018 ACFE Report mentioned above, 50% of corruption cases and 38% of other fraud patterns were detected thanks to a whistleblower system. Companies with a telephone whistleblowing system uncover cases more frequently: 46% of the tips are reported to hotlines, and 30% are received through digital channels. The losses of companies with a telephone whistleblowing system are 50% lower than those that do not offer whistleblowers a telephone reporting channel.

Advantages for companies

But how does such a hotline work? It can either go to a company's internal hotline or be outsourced to a professional service provider. TELAG is such a service provider, which has been operating an anonymous whistleblower system for companies in the financial and service sectors for 13 years, which meets the requirements of the new EU Whistleblower Directive. The company provides the software for anonymous processing of digital and telephone reports as well as 24-hour availability in 24 languages. TELAG's whistleblower system also includes report qualification, case management and, if necessary, an ombudsman service with an independent law firm.

With an anonymous whistleblowing system, damage to image and reputation can be avoided and employee trust promoted. The liability risk for members of management and boards of directors is reduced. "The aim is that potential grievances can be investigated internally and cleared up before they become public knowledge. Companies demonstrate that corporate governance is not an empty phrase, but a promise to employees to take their reports seriously. This ultimately pays off in terms of the working atmosphere and corporate culture," says Thomas Wittkopf.

EU Whistleblower Directive: Recommendation for Swiss companies

• A professional whistleblowing system is considered best practice for corporate groups and SMEs and is particularly recommended as soon as the company has branches in other EU countries and/or employs staff, partners, suppliers from the EU area.

• The reporting process must work by telephone as well as in writing, including a feedback loop to the whistleblower, and ensure the anonymity of whistleblowers.

• The commitment of executives ("tone from the top") underpins seriousness with an anonymous whistleblower system and pays dividends in terms of credibility. Spurred on by the public discourse on ethics and morals in companies, the new generation of employees and managers is demanding business ethics and transparency.

• Last but not least, preventive action is significantly cheaper than cost-intensive clean-up work in the event of a compliance breach, which regularly entails irreparable reputational damage as well as considerable financial consequences - on average CHF 200,000 according to the ACFE Report 2018.

More information: www.telag.ch/whistletag