Monday, July 06, 2020

Whistleblowing – your weapon to fight against fraud

Jul 24. 2019
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By Surasak Suthamcharu, Panyarat Chutiratmanee
Deloitte Thailand
Special to The Nation

A whistleblowing channel is an essential tool in helping any organisation detect potential fraud and misconduct. Evidence of this can be found in the surveys conducted by the Association of Certified Fraud Examiners (ACFE) over the past 10 years, which reveal that frauds detected by ‘Tips’ are much greater than any other detection methods.

The latest survey in 2018 indicated that 40 per cent of the surveyed fraud cases were detected by tips.

Globally, governments and regulatory bodies recognise the importance of whistleblowing. For example, in the US, the Sarbanes Oxley Act (section 301) mandates companies trading on the US Stock Exchange to provide a mechanism for employees to anonymously report concerns about accounting or audit irregularities. In the US, the whistleblower can make a report about fraud and white collar crime to the Department of Justice, while in the UK, the whistleblower can make a report about fraud including bribery and corruption to the Serious Fraud Office.

The US Securities and Exchange Commission (SEC) reports that the Commission’s receipt of whistleblower tips reflects an upward trajectory. Total tips received in 2018 were 5,200 while only 6 tips were reported from Thailand.

Recently, the Thai National Anti-Corruption Commission (NACC) proposed that organisations introduce a reporting channel as 1 of the 8 principles of the bribery control system. In addition, Thai authorities such as NACC and SEC provide channels for whistleblowers to directly report any misconduct.

With an increasing demand for whistleblowing from authorities and its effectiveness as indicated by ACFE’s survey, has the time come for all organisations to consider internal reporting channels putting in place?

Whistleblowing in the wind?

Companies understand that employees see and hear everything that goes on within, including inappropriate behaviour and who is involved. Whistleblowing is, perhaps, the only tool that comes close to pointing out fraud in its nascent stages. It is thus important to build, monitor and continuously nurture this channel. Data from the whistleblower needs to be continuously monitored and integrated into fraud risk management for early detection.

Managing whistleblower complaints effectively

The whistleblower and the complaint are the two main components of every whistleblowing report. Dealing the two with maturity and sensitivity can help the mechanism be successful.

Ongoing support to the whistleblower is important to ensure his/her comfort and that he/she does not face any adverse treatment as a result of his/her actions. Policies should ensure that any detrimental action taken against the whistleblower is treated as a serious matter and that appropriate action is taken. 

A clear and well-documented process for managing complaints can give greater confidence to the whistleblower. Usually, an appropriate senior staff member is assigned to deal with the matter. If the allegation is against that or other senior staff members this scenario can run the risk of allegations being ignored or investigations becoming compromised. Employees need to be made aware of the detailed processes around how their complaints will be handled, so that they can gain trust in the system.

Opening wide enough?

Effective whistleblowing must have an “open wide” concept.

- Service hours and channel

Most companies provide a phone number that employees can call during business hours. The calls may be received by dedicated team. Whistleblowers may be reluctant to make hotline calls from the workplace where they could easily be overheard, have their name show up on caller ID, and tracked in telephone call logs. Thus, enabling access to a 24/7 reporting channel can increase the reporting rate. Offering multiple methods of reporting can also help to generate more tips than just a hotline.

- Language:

Whistleblower reports are sensitive and tricky things to communicate, so not being able to use local language can deter whistleblowing or adversely impact a report’s completeness and accuracy.

- Constituencies:

A significant number of tips may come from external sources such as customers, vendors, shareholders or competitors. Encouraging these stakeholders to use your system could generate better tips.

Other characteristics that can encourage whistleblowers to use a hotline include providing anonymity and confidentiality, communicating the independence and transparency in the process, and offering protection to the whistleblower.

Effective communication

A successful whistleblower system requires effective communication to create and maintain awareness of its existence, build employees’ willingness to report, as well as develop employees’ ability to identify potential wrongdoing.

Companies need to focus their communication on assuring employees that their tips will remain confidential and be properly treated. Once employees trust the whistleblowing and are confident to report, they should be educated about red flags, risks and schemes related to unethical activities. This awareness can be part of a fraud risk management and ethical awareness programme. It is important to communicate that every employee has a role in preventing and detecting fraud and the hotline is a key tool to use for that purpose. Armed with this knowledge, employees will be in a better position to act if they experience/witness suspicious behaviour.

Surasak Suthamcharu is a partner in the Forensic Service of Deloitte Thailand. He can be contacted at [email protected]

Panyarat Chutiratmanee is associate director of the Forensic Service of Deloitte Thailand. He can be contacted at [email protected]

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