What do recruitment agencies need to know about the EU whistle-blower directive?

Recruitment EU whistle-blower directive

22nd October 2019

There can be no doubt that the international fight against tax fraud is in full swing. As authorities seek ways to identify and prosecute criminal behaviour, we’re seeing an interesting trend emerge: support for whistle-blowers. In recent months, there have been several reports of backing for informants who have brought fraud to light. Recently, we wrote about plans for bloc-wide EU whistle-blower directive. According to the recent reports, this has now been adopted. Here’s what recruitment agencies need to know.

Recruitment and the EU whistle-blower directive

New EU-wide protections for whistle-blowers who report breaches of EU law have been adopted by the European Council. The new directive requires companies with more than 50 employees or with an annual turnover of €10 million or more to set up internal reporting procedures. It will also apply to regional administrations and municipalities with 10,000 inhabitants or more.

Disclosures in areas including anti-money laundering, data protection, food and product safety, environmental protection, competition law and corporate tax avoidance will all be covered. Member states will have two years to introduce the directive into national law.

Companies covered by the new directive will need to establish a three-tier reporting process, with guaranteed confidentiality for whistle-blowers. Individuals should be able to make protected disclosures internally; to competent authorities where internal channels do not or could not reasonably be expected to work; and to the media where no appropriate action is taken after reporting through the other channels or where this is an “imminent or clear danger to the public interest.”

Organisations and authorities that receive protected disclosures will be required to respond and follow-up reports from whistle-blowers, with a three-month deadline. No retaliation against genuine informers will be permitted, and they must be given full access to free advice in the event of workplace harassment or dismissal. They will also be exempt from liability for disclosing the information in future judicial proceedings.

The directive incorporates safeguards to protect companies, individuals and others against the risk of malicious or abusive reporting and unjustified reputational damage. In particular, those affected by a whistle-blower’s report will be presumed innocent until after a fair trial has taken place.

First of many steps

However, the EU whistle-blower directive isn’t the only example of increased support for informants that recruitment agencies need to be aware of. For example, in Luxembourg, the countries Court of Appeal acquitted Antoine Deltour of stealing PwC documents as part of the LuxLeaks scandal, which brought to light a number tax avoidance schemes. While Deltour and two fellow informants initially faced scrutiny for photocopying PwC documents, he was eventually cleared of all charges.

Furthermore, just a few months ago, HMRC revealed that the number of calls to its tax fraud hotline doubled last year, with the UK authority paying out £343,500 for tip offs between 2017-18. While this move has come under fire from some who claim it encourages the provision of incorrect information in order to seek financial gain, there can be no doubt that it demonstrates that HMRC is going to great lengths to encourage and protect whistle-blowers.

Focus on compliance now before it’s too late!

The EU whistle-blower directive is evidence that the bloc is prepared to pull out all the stops to ensure that tax evasion can be tackled as effectively as possible. Much like other international initiatives, it is hoped the move will directly aid international bodies in tracking down and prosecuting criminals.

If you’re a recruitment agency placing contractors abroad, it’s vital that compliance is at the top of your priority list. While many firms believe that they are not at risk, the actions of just one non-compliant contractor could land your company in hot water. Unfortunately, the complexity of global regulation means that this is not an easy thing to do. For this reason, we recommend seeking out help from experts that specialise in international compliance.

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