Are fraud reporting hotlines worth it? Yes, according to the ACFE’s Report to the Nations, a biennial global study on occupational fraud. For more than a decade, the ACFE’s Report to the Nations has measured the effect of hotlines on generating tips about occupational fraud, and the data has consistently shown that frauds are more likely to be detected by tip when a hotline is in place. While 46% of cases in the report were detected by tip at organizations with a hotline, only 30% of cases were detected by tip in organizations without a hotline.Read More
Mustafa Yusuf-Adebola, CFE, ACCA
In reviewing organizations’ whistleblowing platforms, I have noticed two features that consistently affect a program’s success. One, reporters have no trust in the system due to fear of victimization or intimidation when/if the veil of anonymity is removed. And, two, reporters are not encouraged to speak out because there are no (appearances of) far-reaching actions after investigations are conducted. Consequently, there is less motivation to report wrongdoing.
Trust is the bedrock of any whistleblowing platform; as such, potential reporters are comforted by the assurance that cases will be treated with the utmost confidentiality. For instance, an employee of an organization once revealed to me that he would blow the whistle only after he had submitted his resignation letter because the subjects involved in the alleged fraud were top executives. According to him, this was his own way of "rocking the ship" before leaving.
To encourage reporting through an effective whistleblowing policy, a few challenges I have noted are:
- Low awareness: Organizations need to appreciate the importance of publicizing their whistleblowing policies and the reporting channels to everyone (including third parties).
- Poor infrastructure: Create and enable appropriate channels (emails, phone lines, suggestion boxes or internet links) to cater for the preference of the reporter. For example, some organizations have dead web portal links and nonfunctioning phone lines used for whistleblowing. One company published a reporting phone number in its annual report that was entirely different from the website’s listing. These are easy ways to show potential reporters that you want to hear from them.
- No follow-up messages: A program should include assignments of case numbers for each report to give the reporter assurances of activities taken after they have made a claim. In certain instances, a case could be investigated for a long period of time and the reporter should be routinely informed of updates.
- Ignoring data analytics: Data analytics is a very useful tool in proactively responding to fraud. Collating and recording all relevant data for established and unestablished cases on the whistleblowing platform can help anti-fraud professionals proactively address fraud indicators, assist in updating in-house training courses, and help in increasing employees' fraud awareness and reviewing of company policies.
Ultimately, the support and actions of top management will go a long way to provide a good framework for preventing and detecting fraud through whistleblowing programs.