23 June 2017
Speech - #2017012, 2017

In the role of: Minister for Revenue and Financial Services [19 July 2016 - 28 August 2018]

Address to the University of Melbourne Whistleblowing seminar, Melbourne

Check against delivery

Thank you Sue and Vivienne for your warm welcome.

Any individual who makes the decision to expose corruption, illegality, or unethical behaviour within their organisation is embarking on a precarious and potentially harrowing path.

The whistleblower story is of course brilliant material for the Hollywood writer, as movies such as On the Waterfront, Serpico, The Insider, All the President’s Men, Silkwood and Erin Brockovich can attest.

It is the story of the little guy or girl overcoming adversity and triumphing over the big corporation or big government.

It is David versus Goliath.

It is the amateur small town lawyer trouncing the big city law firm.

But in the real world their decision to break the silence can take years off their lives – and in the very worst cases – can result in the loss of everything without actually having changed anything.

It can mean the loss of friends, colleagues, spouses, and careers. It can mean financial hardship, mental breakdown, drug and alcohol problems, and almost always isolation.

Look at the case of Jeff Morris – probably Australia’s best known recent whistleblower, who, as most of you would be aware, blew the whistle on misconduct in the Commonwealth Bank of Australia’s financial planning arm in 2008. Exposing the bank’s misconduct has taken a serious toll on Mr Morris.

His anonymity was not protected, he was subject to death threats, he lost his job and in the end he lost his whole family. This is absolutely unacceptable.

We want to make the wrongdoer – not the whistleblower – the focus. The Turnbull Government is determined to change our whistleblower laws to better protect people like Jeff Morris.

Public policy and community attitudes in Australia and overseas have shifted greatly over recent years and in significant part due to the work that you and other academics are doing in this field.

Academia has developed a rich analysis and understanding of the law, ethics, and policy frameworks surrounding legal protections for whistleblowers and the dynamics and behaviour of organisations in respect of whistleblowers.

But the Government can only go so far in remedying the issues identified by these studies.

It cannot police organisational behaviour in every private company or organisation.

That is why every company and organisation must have their own policies and procedures in place, to provide for the protection of individuals who speak up. They need governance structures that encourage a culture of openness and transparency and a willingness to be self-critical, as Professor A.J. Brown of Griffith University, has strongly argued.

As Professor Brown notes: “It’s also going to be cheaper and better if our laws put a clear onus on organisations to get it right for themselves, wherever reasonable and possible.”

Whistleblower laws today

When it comes to the law today, as you know, protections for corporate whistleblowers have formed part of the Corporations Act since 2004 but they have not been widely used.

Concerns have been expressed by academics and others that the existing regime is too confusing, ineffective, and has too many gaps compared with public sector protections and overseas regimes.

For example, the scope of protection is too narrow and doesn’t extend to former employees or contractors, which means that an employee who blows the whistle on misconduct after leaving an organisation – which would not be uncommon – is not protected under the current regime. This is unacceptable.

Further, the law needs to facilitate effective investigations of misconduct reported to the regulators, while protecting the anonymity of the whilstleblower’s identity at the same time. We need to get this balance right.

There is also the need to clarify and strengthen the position in relation to compensation for whistleblowers who suffer detrimental treatment in response to them blowing the whistle.

When it comes to comparable protections for those who blow the whistle on tax misconduct, protections are sorely lacking.

How can it be that in today’s day and age those people who blow the whistle on tax fraud, evasion or avoidance have no specific statutory protections?

Indeed, while the Australian Taxation Office (ATO) receives and acts on disclosures, there are no express laws to protect people who make disclosures from reprisals or other ramifications, or which provide them with a right to compensation if they are victimised.

Examining whistleblowing reform

This is why, on becoming the Minister with responsibility for the corporations and tax laws, I urgently commenced work to fix these laws and have undertaken a comprehensive review of Australia’s corporate whistleblower regime.

It is clear that Australia’s corporate whistleblower framework lags international best practice, and does not provide the protections provided in the public sector under the Public Interest Disclosure Act 2013.

As part of a wider tax integrity package announced in the 2016–17 Budget, I announced a commitment to providing better protection to tax whistleblowers.

Since then there have been several key developments which have driven home the importance of whistleblowing in creating a more accountable and transparent society.

In December last year, as part of Australia’s first Open Government National Action Plan, the Government committed to strengthening protections for corporate whistleblowers and reaffirmed the Budget measure to protect tax whistleblowers.

One benefit of simultaneously consulting on the new tax protections and the strengthening of corporate whistleblower rules is that it enables us to ensure consistency of best practice between whistleblower protections and across all sectors.

In keeping with the government’s commitment to the Action Plan, in December last year I released a consultation paper which invited comment on the introduction of protections for tax whistleblowers and strengthening protections for corporate whistleblowers.

Many of you in this room contributed to the consultation. I thank you for being part of the process and contributing to significant reform in this area. I also want to commend the Joint Parliamentary Committee on Corporations and Financial Services for the work they are doing to shine a light on these critical issues.

The Government’s next step is to release exposure draft legislation on both tax and corporate whistleblower protections for public comment prior to their introduction into Parliament later this year.

Towards whistleblowing reform

The Turnbull Government is determined to get the whistleblower settings right so we can uncover corporate and tax misconduct early and deal with it decisively.

In its submission to the Parliamentary Inquiry, ASIC flagged the value it places on information received from whistleblowers, saying:

“… it helps expose misconduct that may otherwise go undetected for long periods of time and cause serious harm to consumers and investors.”1

We’ve set our sights on a stronger legal framework: one that provides whistleblowers with the confidence and the protections to make disclosures; that empowers regulators to take swift, effective action; and which also provides procedural fairness to those who are the subject of a whistleblower’s disclosure.

We will strengthen the corporate regime, so that whistleblowers feel more confident in making disclosures through anonymous reporting and protection of their identity. We will expand the scope to include a broader class of people who can qualify for protection. And importantly, we will improve access to compensation should whistleblowers be the subject of reprisals.

We recognise the need to toughen and harmonise corporate whistleblower protections with those in the public sector and to introduce comparable protections for those who blow the whistle on tax misconduct, which sorely lacks protections.

I believe strongly that no one should be worse off for blowing the whistle on misconduct and that all whistleblowers should have greater access to compensation if they suffer a detriment as a result of their whistleblowing.

Weighing up the reward system

Our recent consultation paper also invited views on the merits of introducing a US bounty-style reward system as an incentive for whistleblowers.

In the US, the Dodd-Frank Act and the False Claims Act make provision, in some cases, for rewards for whistleblowers, whose reports lead to the successful prosecution of a violation of securities laws or fraud on the government. Under this system, whistleblowers may receive a percentage of collected proceeds from a successful court action. For tax whistleblowers there are similar discretionary reward systems operating in the UK and Canada.

In addition to access to compensation, we are giving consideration to whether a reward system makes sense for Australia.

On the one hand, introducing a reward system may encourage more whistleblowers to come forward. On the other, there are some associated risks.

For example, individuals may only be willing to raise a concern when there is proof of a breach and certainty that a monetary reward will be available.

This may be counterproductive as it may deter people from coming forward at an earlier stage when it is unclear whether a breach of the law has occurred, and therefore whether they would be eligible for a reward. This could reduce the opportunity to detect malpractice early and prevent harm, which is the main policy reason for providing statutory protections to whistleblowers – to encourage them to come forward as early as possible.

It is also possible that a reward system could encourage greater levels of nuisance reporting to regulators, leading them to waste resources checking claims that lead nowhere.

Of course, there is an argument that if the reward system is structured properly, it may create a stronger inducement to report, than not having a reward scheme in place.

It could be argued, for instance, that the Australian Taxation Office would be better served in having the option of using incentives to encourage whistleblowing about wealthy individuals or big corporations engaged in large-scale tax evasion.

But for all these reasons — and more — the introduction of a rewards-based incentives system needs careful consideration and is being actively considered by the government.

Closing remarks

So, let me finish by again thanking the University of Melbourne for hosting today’s seminar.

The work you do is enormously important because finding ways to protect the individual who decides to shine a light on the misconduct of an individual or organisation, whether a corporation, a church, a union, a police force or a government department, is ultimately beneficial for society as a whole.

I look forward to providing you with the Government’s draft legislation in the near future.

Ultimately, the reforms we take will be in the interest of consumers, investors, employees and the industry as a whole and I thank you, in advance, for playing your part in ensuring these reforms are best practice. Thank you.

1 Review of tax and corporate whistleblower protections in Australia – Submission by the Australian Securities and Investments Commission (February 2017)