Paying for information: should the SFO incentivise whistleblowers?

Complicated problems often require creative solutions. The Serious Fraud Office (SFO) has been on the back foot publicity-wise for some time, as a result of cases collapsing and prominent convictions being overturned. It should therefore be no surprise that its now-outgoing Director Nick Ephgrave marked his tenure with bold proposals to shake up the agency and create a reputation for success rather than scandal. Despite his term in office heading to a premature end, one of those proposals – adopting a US-style incentivisation scheme for whistleblowers – remains in dry ink in the SFO business plan for 2025-2026.

In this context, whistleblowing is a report to the authorities by an employee of suspected wrongdoing within their organisation. The SFO is one UK investigatory body currently benefitting from whistleblowing, with its Intelligence Division having processed 167 whistleblowing disclosures from a total of 1,450 referrals between 2024-2025. Although no UK agency refuses whistleblowing reports as a matter of policy, few offer financial compensation to whistleblowers. This is in contrast to US practice, and Ephgrave has not hidden that the inspiration for pursuing this novel approach stems in part from the success of incentive schemes offered by law enforcement agencies across the Atlantic.

The US example

The U.S. Securities and Exchange Commission (SEC) utilises provisions under section 922 of the Dodd-Frank Act to compensate whistleblowers. The requirements are straightforward:  

• the whistleblower’s information must be ‘original’, i.e. derived from the whistleblower’s independent knowledge or analysis;

• it must not already be known to the SEC; and 

• it must not be exclusively derived from an allegation made in legal proceedings, a government report, or from the media. 

If the SEC’s prosecution is successful and the financial sanction exceeds $1 million, the whistleblower is entitled to compensation of between 10-30% of the sanction. In 2020, the Commission awarded $175 million to 39 individuals, which rose to $255 million awarded to 47 individuals in 2024.

The SEC’s philosophy was put bluntly by Nicole Creola Kelly, the chief of the SEC Whistleblower Program, in 2021: “I don’t think people appreciate this enough…that when a whistleblower comes forward, they might have potential exposure. We pay whistleblowers to have culpability.” 

Inspired by the SEC’s success, the Department of Justice (“DOJ”) initiated its own Whistleblower Awards Pilot Program in 2024, providing a financial incentive for the reporting of corporate misconduct akin to that investigated by the SFO. Ephgrave has claimed that many hundreds of whistleblowers have chosen to report wrongdoing abroad due to the lack of financial incentive in the UK. If implemented, the SFO’s proposals would seek to keep at least some of that intelligence bounty at home.  

The UK opposition

The Financial Conduct Authority (“FCA”) and Prudential Regulation Authority (PRA) have previously formed a united front against incentive schemes. Their joint 2014 report appeared to halt incentive schemes dead in their tracks, at least for the two regulators. Amongst the various risks and challenges cited were:

• malicious or speculative reporting; 

• entrapment – a party seeking to engineer or encourage wrongdoing to create an opportunity to report; 

• conflicts of interest in court – if a whistleblower’s evidence is subsequently relied upon, will the incentive undermine their credibility?; 

• qualification criteria – striking the balance between ensuring valuable reports are remunerated, without raising the expectations of payments for low quality reports or reports made in bad faith;

• public perceptions – potentially significant payouts for whistleblowing would be at odds with UK policy and cultural expectations around reporting wrongdoing. 

Many of the FCA/PRA objections still carry weight and would equally apply to paid SFO whistleblowers, particularly malicious or speculative reporting. The prospect of reward will inevitably encourage bad actors to furnish unreliable or contrived information in the hope of a payout, whilst perhaps glossing over their own culpability. In doing so, they may well tarnish the overall perception of whistleblowing, at least in this jurisdiction, which until now at least has rested firmly on a sense of duty to call out wrongdoing simply because it is the right thing to do. 

Less persuasive is the suggestion that incentive payments create an irreconcilable conflict of interest. It is also true that whistleblowers who go on to give evidence will have their credibility tested. However, this is a consistent challenge faced by prosecutors of all stripes. Every day juries assess the character of witnesses and evaluate their motives. As long as the application of the incentive scheme in each case is properly disclosed, it is down to the jury to make a determination as to the whistleblower’s reliability. 

Whatever the arguments against, the tone surrounding incentive schemes for whistleblowers is undoubtedly at a turning point. HM Revenue & Customs (HMRC) has recently implemented a ‘strengthened’ reward scheme and, notwithstanding its former misgivings, the FCA tentatively announced in December its recognition of “benefits in, and implications of, providing incentivisation to whistleblowers.”  The FCA’s change in stance is particularly interesting, given the existing obligation for its supervised firms and individuals to proactively report wrongdoing.

Protection for whistleblowers

For those who decide to make a disclosure, the current legal protections are afforded by the Public Interest Disclosure Act 1998 (PIDA), which ensures that the whistleblowing employee “has the right not to be subjected to any detriment by any act, or any deliberate failure to act, done [by their employer].” However, these measures are not fit for purpose. Should the whistleblower be treated unfairly, their remedy is a claim for damages against their employer, which is daunting, potentially expensive and has no guarantee of success. Furthermore, irrespective of motive or outcome, involvement in whistleblowing can have an irreparable impact on reputation, particularly within close-knit industries. 

When considering an incentive scheme to augment these protections, those who blow the whistle must have their expectations properly set from the beginning. The pay-out mechanism and prospects of success in general terms should be made clear in published guidance and during the earliest stages of reporting, to ensure that each individual is fully informed as to the protection that a (potential) future settlement might offer. 

Simultaneously, businesses will need to consider their own whistleblowing policies. Employers generally encourage their workers to report wrongdoing internally in the first instance, but query whether the average such programme is sufficient to discourage a whistleblower from reporting straight to the SFO. Cementing a culture which encourages internal reporting would in turn bolster the spirit of the protections offered by PIDA. 

What next for the SFO? 

The SFO is pushing an ‘everything now’ approach to intelligence, whether it be tip-offs from whistleblowers or corporate self-reporting. It is keen to filter the good information from the bad itself, implementing a ‘carrot-and-stick’ approach in order to have sight of potential criminal wrongdoing at the earliest opportunity. The promotion of whistleblower incentive schemes sits neatly alongside the SFO’s stance on corporate self-reporting – most recently set out in its April 2025 guidance on Corporate Cooperation – and in particular self-reporting as the primary route to securing a Deferred Prosecution Agreement. 

The SFO would do well to ensure that incentives for whistleblowers and self-reporting are not at odds. Interestingly, the DOJ’s Corporate Whistleblower Awards Pilot Program has catered for this balance, which ultimately comes down to timing. If a company self-reports within 120 days of receiving the whistleblower’s report they can still be eligible for a presumption of a declination under the Corporate Enforcement and Voluntary Self-Disclosure Policy, the first step towards a non-prosecution agreement. 

On the flip side, an employee in the US who reports internally triggers a countdown of 120 days, within which they must report to the DOJ following the engagement with their employer. Seemingly in the spirit of encouraging reporting wholesale, internal reporting by the whistleblower in the first instance can increase the size of their award at the end of a case. The SFO should keep this approach in mind, if whistleblower incentives become a reality.

Conclusion

The US has led the way and it appears the UK will follow eventually. The SFO seems confident that it can filter good information from the bad, and not agonise about compromised witnesses. From an agency perspective, it is difficult to see how that approach is wrong. If the SFO can justify a programme into existence in the UK, it may also have a significant impact on how businesses respond to internal reporting. Perhaps the only remaining question is whether Mr Ephgrave’s successor will share in his enthusiasm to take whistleblowing incentives from concept to reality.  

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