Banking StandardsWritten evidence from Martin Woods

1. My name is Martin Woods, I am a whistleblower. I am presently employed by Thomson Reuters as the Money Laundering Reporting Officer for the FSA regulated businesses, Reuters Limited (RL) and Reuters Transaction Services Limited (RTSL) . I am grateful to the Parliamentary Banking Commission of Banking Standards (the Commission) for inviting me to make this written submission, I am confident my submission will add value to the Commission’s work.

2. The submission is all my own work, my own words, my own thoughts, my own proposals based upon my own experiences and my own assessments of instances within the police service and the financial services industry.

3. I commenced working as an anti-money laundering (AML) compliance officer within investment banks in London in 2001. Prior to this I had served as a police officer for eighteen years, ultimately working as a detective within the then Money Laundering Investigation Team (MLIT) of the then National Crime Squad (NCS). From 2001–04 I worked for ABN Amro Bank NV (now part of the Royal Bank of Scotland (RBS), I then spent approximately 6 months with Society Generale, before joining Wachovia Bank NA (now part of Wells Fargo NA) where I eventually blew the whistle in relation to concerns the bank was laundering the proceeds of Mexican drug trafficking.

4. Between 2009 and 2012 I worked as a self-employed consultant, within the area of financial crime and specifically AML. The Commission has requested I comment upon some specific issues, as set out below:

What steps should be taken to tackle the “adverse culture within banks which is detrimental to whistleblowing” which you mention in your previous cover letter;

What practical steps could be taken to encourage/facilitate whistleblowers and/or to make the whistleblowing process more straightforward and transparent;

What would be the perceived advantages of providing a financial incentive to whistleblowers as provided for in the US by the Dodd-Frank Act?

5. Within this request you have referenced my prior submission to the Commission in September 2012 and for the benefit of easy reference I will re-submit the same documents again. Such documents set out a number of whistleblowing issues which I have encountered over the prior years. When drafting and submitting this document I am conscious of a need to assist the Commission to identify a new approach, which will improve the flow and use of intelligence provided by whistleblowers within banks.

6. It is a big task, but not one I shy away from, indeed for some time I have been working with a number of fellow whistleblowers (WBUK)1 to improve the general perception and treatment of whistleblowers, in essence to make a difference for the whistleblower of tomorrow. Thus, I am focussed, but there is a danger I will drift towards my own issues, my own agenda, perhaps more than any other issue, my own anger.

7. The fact is the vast majority, perhaps all whistleblowers are often gripped by a deep sense of injustice, which in turn fuels anger and frustration. As a result I have become very self-obsessed and when asked to talk about the issues that have impacted me and my family emotions come into play, which will not necessarily help the Commission. Therefore, I have structured this submission in a way which I hope will be helpful, in essence, the first section answers the questions posed to me and the second section provides some of the background to my own experiences, which clearly drive the answers provided.

8. What steps should be taken to tackle the “adverse culture within banks which is detrimental to whistleblowing” which you mention in your previous cover letter?

9. Senior managers need to derive benefit from whistleblowing, they need to recognise whistleblowing as an important piece of the bank’s overall control framework. Whistleblowers need to be encouraged. This may actually be championed by shareholders, who have suffered and will continue to suffer, significant losses, because of the failure of banks to control some of the rogue elements amongst their employees.

10. Prior experiences and instances suggest there is a need for some independent, totally independent element within the whistleblowing process. Ordinarily, legitimate whistleblowers raise concerns about failures or perceived failures, which mean someone, somewhere within the bank may have made a mistake. My experience within the investment banks I worked for is that there is a blame culture, and quite naturally people seek to avoid being blamed. In the event a whistleblower raises a concern which impacts a manager, the manager may seek to suppress the “concern” as they may perceive it is in their own interties to do so. Hence there is a need for some independence, most certainly away from a vertical management structure.

11. It is my belief that the culture within the investment banks is not conducive to supporting whistleblowers, as short term greed and self interest are too often the dominant factors. It is my experience that all employees within investment banks are eligible for a bonus, which is both a good and bad thing. It does create a short term, self centred outlook, and many employees focus entirely upon securing as big a bonus as possible, occasionally by whatever means.

12. [Redacted]

13. [Redacted]

14. I will lose friends for stating this, but nonetheless, it needs to be stated, I do not believe the compliance function, the risk function and perhaps other support functions should be within the bonus regimes of the investment banks. I believe it creates the wrong focus and generates a poor outcome. I would pay these employees more money within their salary, but would not pay a bonus that was subject to their performance as in my experience the bonus may be used to compromise their performance.

15. I also believe the industry needs to be better trained about what whistleblowing is all about. It has a very negative image. In July of last year I presented at a financial crime conference ***. A fellow presenter was a solicitor from a major London law firm. ***. Two things she said struck me as negative and damaging, firstly she said “Don’t let lunatic whistleblowers run around your firm.” Secondly she said, “Don’t let people write arse covering emails.”

16. Following the solicitor’s presentation and prior to a panel discussion I told the conference organiser I needed to return to the asylum and I left the conference. This little episode is very enlightening, I later learnt none of the 100+ delegates challenged the solicitor about her comments, which actually demonstrates that whistleblowers are viewed very negatively, they are often seen as the enemy.

17. If we pause for a moment and carefully consider the actions of a legitimate whistleblower, he/she is ordinarily seeking to tell the truth. Likewise, “arse covering emails” only work when they contain the truth and therefore I contend the solicitor was seeking to suppress the whistleblower and the truth. This has to change, as suppression of the truth is not in the best interests of the public, the bank, the bank’s shareholders and the thousands of honest hard working bank employees.

18. The Commission should wonder, how did we ever arrive at a juncture, where a solicitor from a prominent London law firm openly tells bank compliance officers to suppress the truth? Clearly the solicitor was comfortable and confident in her actions. Equally the compliance officers were not disturbed as none of them challenged her.

19. In contrast, earlier this week, Tuesday 12th February 2013, a prominent London based law firm invited clients and regulated firms to an event referenced “Managing an effective internal whistleblowing programme.” This perhaps indicates diverse opinions in the City or a change of views and culture as a result of the LIBOR scandal. Whatever the reason, such an event is most welcome.

20. Importantly, the regulator needs to take a lead here. The FSA needs to be clearer and more consistent with the messages sent out in relation to whistleblowing. My own experience with the FSA, as set out below has not been a positive one, but this is compounded by FSA actions in respect of people who did not report incidents to them.

21. The FSA has implemented an approval process for many people working in banking and the financial services industry. This approval applies to many functions, including, compliance heads, investment advisors and persons selling investment products. Within the “approved persons” regime2, such employees must maintain an open and cooperative relationship with the FSA and report suspicious transactions and significant incidents.

22. In early 2012, the FSA sanctioned two individuals for their failure to comply with their reporting requirements. In referencing the individuals, a senior FSA employee likened the two men to “the dog that didn’t bark3“ Both men admitted failing to report suspicious transactions, each was fined, but retained their status as approved persons. Seen from one perspective, the men were indirectly rewarded for staying silent, no lunatic whistleblowers here.

23. When I blew the whistle, the FSA told me I would never work for the bank again and it took me a long time to recover my status as an approved person. The FSA action in relation to the two individuals did very little to encourage whistleblowing, on the contrary, these two men were fortunate and in the long-term the outcome for them was far more positive than it ordinarily is for whistleblowers.

24. I believe that one of the difficulties of blowing the whistle in a bank is that in parallel, the individual doing so is also blowing the whistle against the FSA. It is important to understand the role of the FSA and the connection to regulated firms and banks. The FSA supervises banks and therefore, when there is a big failure within the bank, it commonly follows, there has been a failure in the supervisory process.

25. What practical steps could be taken to encourage/facilitate whistleblowers and/or to make the whistleblowing process more straightforward and transparent?

26. We need to ask ourselves, what do we want from a whistleblowing process and how will we secure that? The primary issue is the negative way in which whistleblowing and whistleblowers are perceived, as articulated by the solicitor at the conference, referenced above. I would encourage the Commission to look at those firms that positively champion and promote whistleblowing, a very good example of which is (I believe) BHP Billiton.

27. Absent to a change of culture and attitudes, it is not easy to encourage whistleblowers, there are far too many unhappy endings in the stories of whistleblowers. The change of attitude could/should start with an improved welfare programme, whistleblowing is very stressful and if whistleblowers are to be encouraged and valued we need to recognise that value and help them with their stress.

28. As a society we need to value whistleblowers, they need to be seen for the force of good that they are. If banks want to encourage whistleblowing, they need to openly promote and support it.

29. As to a more straight forward and transparent process, there are two issues here, one being the process and the other being transparency. Each firm has its own process, likewise the FSA has its own process. Ideally all processes should provide for anonymity, therefore, reduced transparency. The actual act of blowing the whistle is one which ordinarily requires lots of analysis and assessment by the whistleblower, who will commonly wish he/she were wrong in their assessment and consequently the need to blow the whistle will evaporate.

30. The question needs to be considered in the context of culture, BHP Billiton have a very straight forward process which constantly encourages the whistleblower. This makes the whistleblower’s assessment and analysis quicker and the actual whistleblowing easier. Put quite simply, that is because the firm wants to hear from the whistleblower. This refreshing approach is not one I have identified within banking.

31. The transparency point works both ways, as stated above the lack of transparency can protect the whistleblowers, but conversely, the lack of information provided to a whistleblowers, increases stress and isolation, often causing the whistleblower to question the wisdom of their actions. For my part I requested FSA update me on their actions pursuant to my whistleblowing, I also made a formal complaint in respect of Wachovia Bank’s detrimental treatment of me as a whistleblower4. FSA declined to give me any information and ultimately stated they would not be writing to me again. So what did the FSA do in respect of my two whistleblowing reports referenced below? The answer is, I do not know. Thus transparency is something that is missing and needs to be addressed. It is as though the information/intelligence business, is one way and the whistleblower is not to be trusted with the information. There may be some logic to this, as he/she having blown the whistle once before, may do it again should he/she be unsatisfied with the actions of the FSA.

32. It is also difficult for the FSA and banks to openly advertise the success of a case brought because of a whistleblower, without potentially impacting upon the anonymity of a whistleblower. The process would benefit from improved dialogue between whistleblowers and banks and whistleblowers and the FSA.

33. What would be the perceived advantages of providing a financial incentive to whistleblowers as provided for in the US by the Dodd-Frank Act?

34. Prior to answering this question, the Commission must keep in mind that whistleblowers in the UK do not currently receive statutory rewards for the information they provide. Thus most legitimate whistleblowers take action based upon a sense of right and wrong. They take risks, and sacrifice their own self interest. Where whistleblowers have received payments, they have ordinarily resulted from employment tribunal proceedings instigated against employers who subjected the whistleblower to detrimental treatment.

35. I believe the whistleblowing provisions of the Dodd Frank Act arose through a sense of regulatory failure. A failure by the regulators to gather and act upon important intelligence and information. Senators Dodd and Frank determined a change was necessary in order to protect the public. Of course the US have been rewarding whistleblowers for a protracted period of time, through the False Claims Act, which provides a mechanism whereby individuals can instigate legal proceedings on behalf of the Federal Government. It has been very effective in the US and has been recognised as a check and balance against many instances of corporate misconduct.

36. In the event the Commission wishes to ensure whistleblowers and whistleblowing has a more positive impact upon banking culture and regulations, then provisions similar to those set out within the Dodd Frank Act should be enacted. I support such provisions, not because I believe I should have been rewarded a huge sum of money,5 but because the present system is not working. The FSA have not been given the important intelligence and information, the current “approved persons” regime mandates they should have been given. The “open and cooperative” regime has failed, no doubt, in part because of poor culture, fear and intimidation.

37. I am fortunate to count a number of whistleblowers as friends and I have witnessed some very unjust suffering, as both corporate and government machines have been deployed to discourage, dismantle and destroy people, who should actually be applauded, supported and rewarded for their selfless actions.

38. Thus, there is logic to a reward process. Overall, society benefits from whistleblowing and whistleblowers, therefore, they should be encouraged and where appropriate, rewarded, or perhaps more appropriately, compensated for the sacrifice they make and for what will happen to them as a consequence of their actions.6

39. I believe it is appropriate to examine this proposal in the context of the LIBOR fixing scandal, after all, this was the straw that broke the camel’s back and the reason the Commission is undertaking this exercise. Recent evidence revealed within the FSA enforcement notices against UBS and RBS reveals a gang mentality amongst traders. By which I mean a group of people predominantly, perhaps exclusively, men with considerable power and influence, deriving strength from each other, from the size of their gang, the impact of and the power of their actions.

40. This gang mentality was substantially influenced by a notion of “we fix LIBOR [and other rates] because we can.” It was a belief based upon an ability to influence, perhaps even intimidate others and. Significantly the power and strength was fuelled by a perception that they could do what they wanted, because they would not be caught. This is evidenced within the email and chat room dialogue which has since been reviewed by the Commission and published by the FSA. There was no fear that anyone amongst them would break ranks and report the criminal conduct to the authorities. There was no fear of the authorities, in particular the FSA as there was no credible deterrent for their actions.

41. They sought to increase their power, strength and influence by compromising other parties (paying broker substantial fees on “wash” (synthetic) transactions) and drawing them into their gang, their philosophy, the criminal conspiracy. There is no doubt in my mind rewarding whistleblowers would have had a very positive impact upon the LIBOR scandal. These were intelligent people, with a straight forward sense of right and wrong, they knew their actions were wrong, some would have been a little troubled by the same, but as a member of the gang, they decided to stay loyal to and safe within the gang. The potential of a reward would have added a different dimension to the whole conspiracy.

42. An innocent party in the back office of the bank would perhaps have seen the “wash” transactions and reported them. The reward concept gives people an incentive and gives the criminal something to fear from being reported. Paying for intelligence is not wrong, in fact it is totally logical and governments have been doing this for a very long time. Ordinarily the informant/the whistleblower is taking a risk and often a reward is necessary to encourage them to do so.

43. I believe it was this approach which proved to be very successful when the authorities in the UK tackled Irish republican terrorism, post the bombing of Canary Wharf in 1996. I believe it was the provision and the offer of substantial rewards to the informants/whistleblowers which fractured some of the terrorist cells and resulted in a number of failed campaigns on mainland UK.

44. The reward, the offer of a reward changes the way people think, it makes criminals, including criminal traders more vulnerable to each other. It actually stops many crimes taking place, because the criminals determine not to trust each other. The criminal’s risk management will assess the upside and the downside of their actions, their weakness and their vulnerability. Their strength is having control and influence over others, this is substantially reduced when third parties offer incentives which undermine the criminal and the conspiracy.

45. I note that in prior testimony provided to the Commission by Tracy McDermott, the Head of Enforcement she raised the way in which the UK courts view the evidence of whistleblowers. I was somewhat surprised at the statement, which appeared to suggest the courts question the value of the evidence and testimony of whistleblowers. This is in the context of whistleblowers who are not presently rewarded and ordinarily speak out against a sense of wrong doing. I would be deeply offended if a court determined to question the value of my testimony or evidence, because I was a whistleblower.

46. That stated, there are not a lot of instances of whistleblowers actually testifying before the courts. The primary conduct of a whistleblower is to provide intelligence or information. The police informant who tells the police where there is a quantity of drugs does not subsequently provide evidence to the court. I actually believe this shows a lack of understanding by the FSA of how whistleblowers fit into the system, be it legal or regulatory. This is the same FSA who in a way rewarded the non-whistleblower, “the dog that did not bark” by allowing the two men to retain their jobs, as well as the confidence of the FSA.

47. Ms. McDermott also stated, that she did not believe the whistleblowing system is defective, I strongly disagree, and the LIBOR scandal bears full testimony to the failure of both the regulatory system and the whsitleblowing system within it. I would strongly encourage the Commission to carefully consider why they are even looking at the whistleblowing system and I would respectfully suggest the reason is that system is defective.

48. I also note Ms McDermott has stated the FSA has enhanced the intelligence systems and department within the FSA, which is a very welcome and positive move. Of course whistleblowing and whistleblowers fit within the intelligence system and I believe they can add considerable value to the same. Such value will itself be enhanced if whistleblowers are offered the incentive of financial rewards, financial security.

49. Below is some background to the statements I have made above and evidence of my own experiences of the way in which whistleblowing and whistleblowers are treated in banks.

50. Whistleblowing is not something that is new, although legislation in this area is not mature and has constantly been shown to be out of date and riddled with holes. Ordinarily public spirited whistleblowers (all member of WBUK) take such action for a greater good and in the long-term, society, the common man will benefit from such actions, but often, in the short-term, powerful people and organisations potentially have a lot to lose when faced with reports or allegations from whistleblowers.

51. Consequently, the powerful organisations, including governments and banks, as well as powerful people, seek to attack, undermine and discredit the whistleblower, in order to protect their own short-term and long-term interests. The whistleblower is almost always outnumbered, out manoeuvred and invariably outlawyered. In the majority of instances, whistleblowers act alone, it is not that other people do not see what the whistleblower sees, rather they see it, but decide to do nothing about it. People like the status quo and whilst they witness wrong doing, they become passive observers, often controlled and influenced by colleagues and managers and are therefore consciously and sub consciously persuaded to accept the said status quo.

52. When an individual contemplates blowing the whistle, he/she will often hope they are incorrect in their own assessment and judgement, that way they can subscribe to the status quo and remain in the safety of the group of passive observers who constitute the majority. Potential whistleblowers recognise the jeopardy they will face if they cross the line and actually blow the whistle. I know from my own experience it is very isolating, deeply disturbing, one finds oneself in a situation where one questions so many things, in particular one’s own judgement and one’s own conduct. There are very few happy endings for whistleblowers. I have likened my own battles to that of David verses Goliath, in which my sling shot was the legal protection on my household insurance policy, which meant I could fight on more equal terms.

53. Whistleblowers are often “big picture” players as they see the connections between one action and others. A tragic case which highlights this is that of the Challenger space shuttle, where no one actually blew the whistle loud enough and where many dismissed connections which painted a very negative, ultimately tragic picture.

54. So how is all of this relevant to banks and banking culture? The context is simple, banks and senior bankers have become some of the most powerful entities and people in the world. Money buys power, money is power and the banks have a lot of money. Thus, when an individual blows the whistle in a bank, he/she is blowing the whistle against some very powerful and very strong people, who may be threatened by the whistleblower.

55. The key here is information. The whistleblower is a person who seeks to provide information which he/she believes is important, more often than not it relates to mistakes made by others, wrong doing, improper conduct, even criminal acts. The banks, the financial services industry value information, it is arguably the most valuable element within the financial services industry.

56. Information is also critical to effective law enforcement. This is highlighted in the campaigns pursued by the Counter Terrorist Department at Scotland Yard, in one poster campaign, the strap line was “It’s probably nothing but!” Essentially the police were telling the public and continue to tell the public, please provide information, please blow the whistle and report information. Without the support of the public and the provision of vital information, the detectives and investigators within the Counter Terrorist Department would not be as successful as they are. The detectives and investigators within the Counter Terrorist Department are in the market for information, all information and they are actively pursuing it.

57. In contrast, the regulators, and I include the FSA and the Securities and Exchange Commission (SEC) in the US supervise an industry where fortunes are made and lost using information, not always legally. Prior to the advent of the “Global Financial Crisis” (GFC) there is evidence that the supervisors and the regulators were not in the market place for information, or perhaps more precisely, not information from people.

58. The man who blew the whistle against the convicted fraudster Bernie Madoff is a good friend of mine called Harry Markopolos. He submitted a number of reports and made personal presentations to the SEC in which he stated Bernie Madoff and his companies (which included a UK FSA regulated company, Madoff Securities Ltd.) were running the world’s biggest fraud. The SEC took no action and the fraud continued, causing even greater losses to victims. Harry later wrote a book called “No One Would Listen.” The point being, Harry was talking, he was talking loud and clear, he presented scientific, mathematical evidence that Madoff was a fraudster, but he was ignored by the regulators.

59. It maybe the regulators did not understand the complicated mathematics which Harry had applied when concluding Madoff was a fraud and rather than appear to be unintelligent, they ignored it. We have subsequently learnt there were many other “red flags” the regulators ignored when supervising Madoff and his companies, “red flags” which could have corroborated Harry’s evidence were not seen in a “big picture” context by the regulators.

60. Ultimately, the regulators did not discover Madoff’s fraud, rather he gave himself up, because his Ponzi scheme had run out of money. Subsequently the SEC contacted Charlie Rawl, another good friend of mine, the primary whistleblower against Alan Stanford, Sir Alan Stanford, as he once was. Charlie had blown the whistle and submitted documentary evidence to the SEC almost a year earlier and they appear to have done very little with the submission, as Stanford continued in business and continued his fraud. The catalyst for action by the SEC was Madoff giving himself up, this caused the SEC to seek to head off another impending disaster and it was hoped the SEC could suggest Stanford’s arrest and conviction was because of their good work.

61. In the UK it was Paul Moore who, as the Chief Regulatory Risk Officer with HBOS raised concerns about the bank’s business and in particular the failure of risk management to keep pace with the ballooning loans and mortgage business. At the time HBOS like many other banks was making lots of money from such business, the share price was up, dividends were up and on the face of it all was well. Clearly the Board had endorsed and supported the business model and were delivering “great value” to shareholders, albeit, short-term. Thus when Paul spoke out, he was challenging the herd, a strong, powerful herd and the leader of the herd, then James Crosby, now Sir James Crosby, the former Deputy Chairman of FSA, disposed of him, perhaps in order to protect the herd from him.

62. Of course hindsight is an exact science and if we could turn back time, there can be no doubt Sir James Crosby would have made a different decision. The Commission must find a way to ensure that in future the correct decision is made, it is vital for the economy and it is critical for the wellbeing and welfare of the thousands of good, honest hard working people in the finance and banking industry.

63. The added problem for Paul and too some extent myself was that not only did we blow the whistle in regard to what we considered to be improper, if not criminal conduct,7 we also blew the whistle in relation to regulatory failure. This is an important consideration in relation to the questions posed by the Commission and it should not be ignored.

64. My own experience with the FSA should have been a better one. I did not blow the whistle in order to be rewarded, I did so because I saw the connection between the conduct of Wachovia Bank and the thousands of murders in Mexico. It was Tony Blair, who, in 2001, when championing the Proceeds of Crime Act 2002 said, if you take the proceeds out of crime you stop the crime. From an early stage I raised concerns about the anti-money laundering (AML) programme within the bank. I was supported by some outstanding AML professionals in the US as well as some colleagues in London. *** I was not supported by managers within the Compliance and AML function.

65. [Redacted]

66. There came a time when the US authorities took decisive action against Mexican firms laundering millions, perhaps billions of USD through Wachovia. There followed widespread, international media coverage, the most senior managers of the bank in London congratulated me in regards to my actions. [Redacted]


68. [Redacted]

69. [Redacted]

70. [Redacted]

71. [Redacted]

72. [Redacted]

73. [Redacted]

74. As a detective working for the Metropolitan Police and the then National Crime Squad, I had worked with informants who had provided excellent information and intelligence that had resulted in the arrest of robbers, drug dealers, murderers, escaped prisoners and more. Informants were an extremely valuable asset, and the value increased when they remained within or adjacent to criminal groups. Hence I was struck by the FSA’s notion that they did not want the whistleblower, informant staying within or close to the alleged criminal enterprise.

75. This is where the difference crystallizes, detectives are constantly seeking intelligence and information, in particular intelligence from informants, within or adjacent to criminal groups, whereas supervisors are employed to ensure regulated firms operate within the rules and regulations, they are not automatically in the business of seeking intelligence and information, in my instance, more information or intelligence.

76. At the end of the meeting the FSA gave me the telephone number of Public Concern at work (PCW) a whistleblowing charity and the FSA advised me to call them should I encounter any difficulties. This was the FSA’s welfare programme for whistleblowers. The whole episode left me with a sense of emptiness and even further isolation.

77. [Redacted]

78. [Redacted]

79. I contend that this is not in keeping with a whistleblowing system that “is not defective.”

80. I was very surprised and disappointed by this reaction. It contradicted my detective’s way of thinking, it was illogical. Here was an informant contacting the authorities, it was reasonable to presume the informant was about to provide more information. This was clearly not how the FSA and the supervisors saw it, they were not thinking in the way I presumed they would, they were not thinking like detectives.

81. I later submitted a second substantial whistleblowing report to the FSA, the FSA have never responded to this second report. [Redacted]

82. What is the point of this? It is inaction, it is a refusal to listen, it is a refusal to properly investigate, it is wrong and it is dangerous. The whistle was blown, but the authorities were informed, the whistleblower took a risk and at the end of the day nothing was done. Who knows where it will end?

83. [Redacted]

84. [Redacted]

85. [Redacted]

86. In May 2009, the Bank and I settled my tribunal claims by way of mediation and I left the employ of the bank. I subsequently gave evidence to the US authorities at a hearing in Miami. As stated above, I submitted a complaint to the FSA alleging detrimental treatment of a whistleblower by Wachovia Bank. I requested an update as to FSA actions. I was informed FSA would not provide such an update and eventually the FSA wrote to me and stated they would not be writing to me again.

87. In March 2010, Wachovia Bank paid a penalty of $160 million for implementing weak AML controls and laundering millions of USD from the proceeds of drug trafficking. The then Comptroller of the Currency John Dugan wrote to me and commended me for my actions. I later asked if I could provide AML training to the Office of the Comptroller of the Currency (OCC) and the FSA, both organisations declined.

88. I do not believe it will be possible to change the whistleblowing culture within banks until we change the whistleblowing culture of the regulators, only then can the regulator, in the UK, the FSA, fully understand and value whistleblowers and what they can add to safer and sounder regulation.

89. The fact that the FSA do not believe the present whistleblowing system is, in my submission something which should disturb the Commission.

90. [Redacted]

91. [Redacted]

92. ***. As the Commission assesses the culture within banks, set against the background of the LIBOR fixing scandal, I respectfully request you consider the AML issues within RBS, Wachovia, HSBC and other banks. The FSA Final Notice against RBS in respect of the LIBOR fixing contains a list of AML penalties imposed against the Bank, including and £8.75 million penalty imposed upon Coutts. In that instance the FSA stated the AML department was not robust enough to challenge the private bankers. I clearly am robust enough, but RBS do not want me, you may ask yourselves is this in keeping with a change of culture.

93. Ultimately it is all about culture, a culture which promotes the rights morals and values, a culture which encourage people to speak out and rewards them for doing so. The traders criminally fixed LIBOR, because they could, because there was no fear of being caught, there was no credible deterrent, there was there remains a defective whistleblowing system.

14 February 2013

1 WBUK Is a group of whistleblowers who support each other and are lobbying for changes to the way in which society, employers and the legal system treats whistleblowers. At the same time the Group offers advice and support to people who are contemplating blowing the whistle.


3 Arthur Conan Doyle

4 FSA SYSC 18.2.3 The FSA would regard as a serious matter any evidence that a firm had acted to the detriment of a worker because he had made a protected disclosure about matters which are relevant to the functions of the FSA. Such evidence could call into question the fitness and propriety of the firm or relevant members of its staff …

5 Wachovia paid a penalty of $160 million, $50 million of which was payable to the OCC, at a minimum, under the provisions of the Dodd Frank Act I would have been eligible for a reward of $10 million.

6 96% of whistleblowers never again secure permanent fulltime employment in the industry where they blew the whistle (Flirting With Disaster by Marc Gerstein)

7 My former employer Wachovia Bank paid a penalty of $160 million for laundering the proceeds of Mexican drug trafficking.

Prepared 24th June 2013