Corporate Whistleblowing: How it works?

2020-10-12T14:22:35+02:00October 12th, 2020|Publications|

Edward Snowden and  Panama Papers are two synonymous names which immediately bring to mind whistleblowing. However, what is this all about?

What is corporate whistleblowing?

Corporate Whistleblowing consists of exposing irregular practices, misconduct and or any illegal activities within an organisation by either an employee or any other individual privy to such knowledge. Whistleblowers have become an important corporate resource in combating fraud and economic crime, however, strong legislative mechanisms need to be in place to protect whistleblowers from suffering repercussion.

Whistleblower Protection in Malta

Corporate Whistleblowing in Malta is regulated by means of the Protection of Whistleblowers Act which was implemented in 2013. This act provides for procedures by which employees may disclose information regarding improper practices within their workplace and also, to protect employees who make such disclosures from injurious repercussions. Such repercussions may include dismissal, demotion or any kind of other disciplinary measures.

First and foremost, this Act is not applicable to all organisations but limited to the following;

  • Government ministries.
  • Private or public companies which according to their last annual accounts, meet at least two of the following criteria:
    • An average number of more than 250 employees during the financial year;
    • A total balance sheet which exceeds €43 million;
    • An annual turnover which exceeds €50 million.
  • Voluntary organizations which annually raise more than €500,000 from public collections and other donations.

This Act also does not apply to employees engaged within the Police Force, the Armed Forces, the Security Service or the foreign, consular, or diplomatic services. Therefore, employees within one of these services, or with a private organization which do not fulfil the aforementioned criteria, are not afforded with the protection provided by the provisions of this Act when making a disclosure.

In order for a disclosure to be protected under this act it must have been made in good faith and also the whistleblower must have reasonably believed that the information disclosed is substantially true and that such information shows an improper practice being committed on the part of his employer or a fellow employee. The employee must act in the general interest of the company, and not for his own personal interest. Also, the disclosure must not be made for any personal gain or relate to personal grievances of the whistleblower. Furthermore, in order to be protected by this Act, the whistleblower may not remain anonymous but his identity must be disclosed.

This Act states that every employer must have in place internal procedures for receiving and dealing with information about irregular practices occurring within the organisation. Such procedures must indicate who is the Whistleblowing reporting officer, which is the person to whom disclosures can be made. Such information about the existence of these procedures and adequate information on how they should be used must be published widely within the organisation.

In order for the protections afforded under this Act to apply, a whistleblower must first follow the internal reporting procedures set out within the organisation. Only in the circumstances set out in the law, the whistleblower may surpass their institution and make an external disclosure. This is allowed only in the case if:

  • The head of the organisation is or may be involved in improper practice.
  • If the disclosure is a matter of urgency.
  • At the time the whistleblower makes the external disclosure, he would be subjected to an occupational detriment by his employer if he makes an internal disclosure.
  • It is likely that evidence relating to the improper practice will be concealed or destroyed.
  • Although an internal disclosure has previously been made,  the whistleblower has not been informed on the status of the matter disclosed or it is reasonably evident to the whistleblower that there has been no action or recommended action on the matter.

On the other hand, if the whistleblower would have participated in the illegal practice or an accomplice thereto, this Act also allows for the institution of criminal proceedings against the whistleblower and thus would lose the protection afforded by this Act.

A recent analysis conducted in 2018 across the European Union has ranked Malta’s Whistleblower protection laws as the second best, however, as aforementioned, there are still circumstances where individuals would not be protected under this law and thus not treated as whistleblowers.

In conclusion, each case needs to be assessed individually to determine whether disclosure would be protected by the parameters of the law.

For further guidance on the topic and relevant corporate governance matters kindly contact SMM Advocates on [email protected] or call +356 21237167 to book your consultation.

 

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