United Kingdom

Details

  • Service: Advisory, Risk Consulting
  • Type: Business and industry issue
  • Date: 17/07/2012

Companies seek to blow whistle on fraud 

Companies seek to blow whistle on fraud

Many companies are revisiting or ramping up their whistleblowing protocols, prompted, perhaps, by the need to have 'adequate procedures' as mentioned in the UK Bribery Act (2010).


While it is not mandatory for companies to set up a hotline, having one does indicate that the business takes corporate governance seriously. It helps to promote an open culture within the organisation which is, in turn, good not only for stakeholder satisfaction, but also for employee morale.


Fraud costs money - In the region of five percent of a company's turnovers every year.  Surveys in the past and present indicate that whistleblowing is an effective way to detect fraud and it is used by employees more often than any other means of reporting.

 

Why whistleblowing matters


A mechanism that enables feedback from employees, anonymously and securely, is an effective defence against fraud. A hotline can highlight regions and functions where fraud is prevalent and those that do not report fraud at all. An absence of reporting should trigger checks to ensure that appropriate procedures and training are in place and understood. By maintaining whistleblowing statistics, companies can ensure greater supervision over "hot" areas.


In 2011, a KPMG survey found that internal whistleblower reports accounted for 10 percent of fraud detections, while anonymous tip-offs exposed 14 percent.  Therefore, whistleblowing is an effective way to detect fraud and helps to ensure a timely and appropriate response, which can help to minimise further losses and reduce opportunities to cover-up the crime.


Of course, staff can be fearful of repercussions or loss of employment, and may be reluctant to blow the whistle on employees, managers or directors. By ensuring that every allegation is investigated, and by keeping whistleblowers in the loop, greater confidence in the mechanism can result in greater levels of reporting. Whistleblowers are protected under the Public Interest Disclosure Act (1998) where there is reasonable belief that a crime has been committed.


What good practice looks like


Based on our experience of assessing and setting up whistleblowing protocols, here is what we believe an effective policy should look like:

 

  • It should be well advertised throughout the organisation, giving employees easy access to a confidential telephone number.
  • The whistleblower should be kept up-to-date with the investigation. By demonstrating that the allegation is taken seriously, there may be less inclination to divulge the story to the press. This helps to safeguard corporate reputations.
  • It should allow anonymity.
  • Fraud and misconduct as well as bribery and corruption should be captured as reportable offences.
  • If possible it should be independent and run by professional forensic consultants. This helps to increase the integrity of the hotline and gives employees greater confidence in anonymity and resolution.
  • It is sensitive to regions where whistleblowing may not be culturally acceptable.

Contact

Sian JonesSian Jones
Senior Manager, Fraud Risk Management
KPMG in the UK

 

sian.jones@kpmg.co.uk

 

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