New, Changing Laws Call for Open Minds and Informed Objectivity from CFEs


James D. Ratley, CFE
ACFE President and CEO

We’ve all heard the adage that a crisis can be an opportunity. But how often, when we’re focused on solving an immediate problem, do we miss the chance to leap forward to more comprehensive remedies? As CFEs, we owe it to our clients and employers — and to our own career aspirations — to identify and/or devise strategies that meet current and future needs.

With that in mind, consider the Security and Exchange Commission’s (SEC) proposed revamping of its whistle-blower program as mandated by the Dodd-Frank Act (see recent Forbes post). The plan permits those reporting corporate malfeasance to bypass internal whistle-blowing channels and go straight to the SEC without jeopardizing their eligibility for an up-to-30-percent share in any resulting sanction of $1 million or more against corporations.

Critics say this strategy will seriously weaken corporations’ fraud detection and prevention regimes that the Sarbanes-Oxley Act mandated. Plus, if a whistle-blower tells only the SEC about a fraud, the corporation — presuming it is unaware of the fraud — would issue financial statements that inadvertently conceal the fraud.

Therefore, employers might consider revising and strengthening their internal reporting procedures to encourage employees to first raise any concerns directly with them before bringing legal claims in court or to regulatory bodies.

This complex issue calls for equally pressing considerations, such as the need for a prompt, effective response when frauds are revealed and incorporation of whistle-blower protection. In numerous recent cases, employees who reported significant fraud through corporate channels were, at best ignored or, at worst, persecuted. In some cases, the common good also suffered when the unresolved fraud continued.

These valid and sometimes opposing concerns call for open minds and informed objectivity. As CFEs, we are uniquely qualified to provide leadership to our employers and clients and help them implement anti-fraud measures that address both individual incidents and overall circumstances.

Read the full Letter from the President from the latest issue of Fraud Magazine here.