This is a comparatively new requirement from the International Ethics Standards Board for Accountants (IESBA), which effectively places a public interest obligation on accountants who suspect an illegal act to override confidentiality if permitted to do so by law and regulation. The provisions became effective in July 2017 but have yet to be adopted in many countries around the world. Indeed, we at ICAEW made a decision to defer adoption until 1 January 2020, when we will also be implementing the new IESBA ethics code.
This was partly to avoid inundating you with too many versions of the code in a short space of time but, perhaps more importantly, because it won’t really change the way we work. Why? Because for the last 20 or so years, our ethics code has encompassed not just the IESBA code but some add-ons as well, which we share with the Scottish and Irish chartered accountancy institutes. These include a public interest override.
As s140.7 of our code explains, “members may disclose confidential information to third parties, when not obliged to do so by law or regulations, if the disclosure can be justified in the public interest and is not contrary to laws and regulations”. NOCLAR will introduce some changes of process: for instance, it establishes steps that professional accountants will be required to take where they suspect an illegal act before they disclose it to an appropriate external authority.
Those steps will vary depending whether the accountants are working in practice or business, and whether they are junior or senior. This will inevitably lengthen the current two- or three-line requirement in our code by several paragraphs and members would do well to visit it and remind themselves of the public interest override.
So why am I telling you all this, if it changes so little? Because this is not the case in other jurisdictions, some of which face real challenges in implementing the requirement. As you know, the basic premise of the code of ethics is that there is a fundamental code of confidentiality (or professional secrecy, as some continental countries prefer to call it) but NOCLAR allows you to breach it if it is in the public interest.
In some countries, like Belgium, NOCLAR will make absolutely no difference at all because there are strict privacy laws in place, which expressly forbid breaking confidentiality. Then there are countries, such as the UK, that offer some measure of protection for public interest disclosures (in our case, it’s under the 1998 Public Interest Disclosure Act). Some countries are urgently crying out for NOCLAR but you could actually be putting your life at risk by making such a disclosure.
We are, after all, talking about illegal acts such as fraud, corruption and bribery, money laundering and tax payments, which professional accountants may come across in the course of their work. We must also bear in mind that ICAEW has some 24,000 members living and working in 153 countries around the world. While they are still bound by our ethical code, depending on the jurisdiction they are based in, they may also find themselves in difficulty by complying with NOCLAR.
Personal safety has to be a consideration in deciding whether to disclose. Of course, we are not just talking about ICAEW members here. The International Federation of Accountants represents nearly three million professional accountants globally and many of them may struggle to meet the requirement. I hope to meet a number of them at the start of this month during a panel session at the Sydney World Congress of Accountants.
Together with IESBA chair Stavros Thomadakis, we will be discussing the issues that NOCLAR raises and helping people better understand some of the practical challenges associated with implementing it.
We don’t yet know what NOCLAR is going to look like in practice but bearing in mind our vision of a world of strong economies, I believe it is incumbent on all of us to share our experience and support our fellow professional accountants globally as they move towards implementing such an important public interest measure.