Germany’s Financial Regulator Implements New Electronic System Guaranteeing Whistleblowers Absolute Anonymity and Non-traceability

As we reported last summer, Germany’s Financial Supervisory Authority (BaFin) set up a centralized platform for receiving whistleblower complaints of alleged violations of supervisory provisions within the financial sector.

Beginning this year, the BaFin implemented a new electronic system, allowing whistleblowers to submit their reports. The system guarantees the informants absolute anonymity, while on the other hand enabling the BaFin to make contact regarding possible inquiries. Thereby, although taking place on anonymous basis, the newly installed communication channel is expected to give BaFin the opportunity to verify the truth value of the submitted information by posing further questions, e.g. regarding the background of the complaint.

The German Act on Financial Services Supervision provides that employees working in the financial services sector may not be held liable for reporting potential or actual breaches of law under either employment law or criminal law, unless the report was false or grossly negligent. The newly established system is therefore a further measure to ensure that whistleblowers do not suffer any disadvantages from issuing reports to BaFin.

An independent body certifies the guarantee of anonymity. Tracking the informants is technically impossible, as long as they do not enter any data allowing conclusions regarding their identity. However, BaFin asks not to use a computer provided by the employer when submitting a message via the system.

Notably, even when the whistleblower’s identity becomes known, BaFin is legally bound not to pass it on to third parties without the prior consent of the person concerned. This does, however, not apply in case a disclosure of information is required in connection with further investigations or subsequent administrative or court proceedings, or when a court orders its disclosure.

The previously installed channels of communication also remain available, allowing informants to submit reports in writing (on paper or electronically), by phone (with or without recording the conversation), or verbally.

Companies in the financial services sector with German operations should have in mind that, in addition to BaFin’s own platform, the German Act on Financial Services Supervision requires covered financial institutions to provide internal procedures for employees to report violations of supervisory rules, including anonymously. Therefore, a review and update of current whistleblower policies and procedures is recommended.