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Sanctions imposed on multinational corporations failing to register whistleblowing systems

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calendar 12 September 2012
globus Denmark

Danish subsidiaries of parents listed in the US should be mindful of the parents’ obligation to have whistleblowing systems under US law and to their duty to register these systems with the Danish Data Protection Agency. If the company fails to register its whistleblowing system in Denmark, it will be fined.

According to the most recent figures from August 2012, 134 companies in Denmark had registered their whistleblower systems with the Danish Data Protection Agency.

The primary purpose of a whistleblower hotline is to ensure that employees and others can report any wrongdoings in the company to its management or an external hotline.

Under Danish law, it is up to the company whether it wishes to introduce a whistleblower scheme. It is, however, different under US law. And this may cause multinational corporations with Danish subsidiaries to face problems.

US law on whistleblower systems
In 2002 the United States introduced the so-called Sarbanes-Oxley Act which provides that all publicly traded companies must have a whistleblower system. The whistleblower system also applies to the company’s subsidiaries, which will often appear from the internal guidelines of the subsidiary. In 2010 the Dodd-Frank Wall Street Reform and Consumer Protection Act was signed into law, and this Act gives the whistleblower a bonus equal to 10-30 % of the sanctions that would otherwise had been imposed on the company.

Multinational corporations with Danish subsidiaries obliged
The US law is significant to Danish companies if the parent is listed in the United States and where it is typically the parent that administers the company’s whistleblower system. Under Danish data protection law, the company is obliged to register its whistleblower system with the Danish Data Protection Agency. This is important for the companies as a violation of the duty to register is punished by fine. The maximum penalty is in principle imprisonment of up to four months, but this penalty has never been applied in practice.

IUNO’s opinion

Many Danish parents have become attentive to the duty to register their whistleblower systems in Denmark. The problems of whistleblower systems can, however, easily be overlooked by subsidiaries with parents listed in the United States. Therefore, it is particularly important to pay attention to the duty to register whistleblower schemes with the Danish Data Protection Agency and to the sanctions applied in case of failure to register.

Against this background, IUNO recommends all companies with parents listed in the United States to arrange for registration of their whistleblower systems with the Danish Data Protection Agency.

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Anders

Etgen Reitz

Partner

Søren

Hessellund Klausen

Partner

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