Protecting the Protectors: Whistleblowing and Retaliation in the Compliance Arena

Abstract

In the last decade, we learned of massive scandals at some of the world's largest companies. In each of those cases, compliance officers were charged with ensuring that the company adhered to legal and regulatory requirements and their own internal codes of conduct and yet, these companies were not protected from their own bad actors. Compliance functions have grown in importance while, at the same time, it has become increasingly difficult to hire and retain qualified personnel for compliance roles. We posit that a key issue facing compliance personnel-and that could be improved with legislative attention-is the failure of the law to protect compliance officers from retaliation when they blow the whistle by reporting unlawful or unacceptable conduct to superiors inside the organization. In essence, when compliance officers do their jobs and alert the company to possible violations of law or take issue with the company's handling of a potential legal violation, these officers are vulnerable to retaliation and can be terminated, demoted, and the like without legal consequence. The very employees that organizations hire to protect them are themselves unprotected. In this article, we consider compliance officers in three areas: Equal Employment Opportunity (EEO) compliance officers, securities fraud and financial regulatory compliance officers, and anti-money laundering compliance officers. In two out of the three areas, we find compliance officers uniquely exposed to lawful retaliation while the third area provides a far more protective environment and offers a path forward for the other two. In both the EEO sector and the securities fraud sector, we highlight the common law doctrines and statutory interpretations that have created this situation for compliance officers. In contrast the Anti-Money Laundering Act of 2020 (AMLA) provides exceptional protection for whistleblower compliance officers in this sector and, as a result, we propose using the AMLA as model legislation for proposed changes in the other two domains. The plight of compliance officer whistleblowers is complicated by courts that have intentionally and unintentionally narrowed protections without contemplating the broader implications of their actions. We propose that Congress respond to these narrowing doctrines so that compliance officers can effectively do their jobs and protect their organizations from legal liability and scandals, with the assurance of protection against retaliation as they perform this essential function.

Keywords: Whistleblowing, Retaliation, employment law, securities fraud, money laundering, compliance