Sapin II to usher in whistleblowing culture

The newly approved Sapin II anti-corruption law in France will soon introduce mandatory whistleblowing channels for thousands of French firms. The rules, which come into force this June, will change practices in many French firms where, for cultural and legal reasons, experts say whistleblowing has failed to take hold. Whistleblowing systems are widely seen as an effective tool to unearth fraud and corrupt practices within companies. According to the latest Global Fraud & Risk Report by risk consultancy Kroll, channels through which employees, suppliers and other stakeholders can flag corrupt practices were the most successful tool in detecting fraud last year. They were used to unearth irregularities in 44% of the companies surveyed, compared to 39% as a result of internal audit. However, whistleblowing has largely failed to take off in France. “For many years, French companies and French society have been very reluctant towards the issue of whistleblowing,” said Philippe de Montigny, president of consultancy Ethics Intelligence. “The fact that it is imposed now by law constitutes, per se, a sort of revolution.” The Sapin II law has created new compliance obligations for companies that operate in France, including subsidiaries of foreign groups. It establishes mechanisms to protect whistleblowers from retaliation by their employers. It also states that companies with 50 workers or more must set up confidential whistleblowing systems for their employees. Organisations with more than 500 staff and €100m in revenue must have fully fledged whistleblowing compliance systems in place. “The obligation to have confidential whistleblowing systems is not restricted to larger companies. A much higher number of companies must comply with it, including many SMEs,” said Franck Poindessault, a partner at the Boken law office in Paris. “Additionally, whistleblowing systems will not be limited to the denunciation of corruption practices. They must also encompass issues related to the environment and many others. But the full details still depend on the publication of a decree to regulate the law,” he added. The mere introduction of whistleblowing systems will require a profound change of mindset at many French companies. “Trade unions used to complain that whistleblowers received no protection whatsoever. From now on, they will be satisfied to know that a company cannot sanction a worker for having denounced a perceived irregularity,” said Paul-Albert Iweins, a partner at Taylor Wessing in Paris. Under Sapin II, the whistleblower must have at their disposal a secure, confidential channel to make the alleged questionable practices known to top management, explained Transparency International. If there is no such channel available, or if adequate measures are not adopted, the whistleblower is entitled to go straight to the authorities. If, after three months, the authorities do not act, whistleblowers can go public with the information without fear of reprisals from their company, Transparency International added. Any whistleblower that can demonstrate they are under serious and imminent danger can go straight to the authorities. Sapin II also stipulates financial punishments for managers who try to put obstacles in the way of whistleblowers. It falls short, however, of enabling authorities to grant financial rewards to those who help them to recover fraudulent money, as the Security and Exchanges Commission in the US commonly does. French firms may now be more at risk from whistleblower accusations. “Companies may feel that they will be the target of abusive denunciations that can threaten the stability of the business, now that whistleblowers are protected,” Mr Iweins said. To reduce the risk of false claims, however, Sapin II also implements fines for those who make unsubstantiated accusations in bad faith.

Sapin II to usher in whistleblowing culture

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