Dial F for Fraud: Whistleblower hotlines are the way to go

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[author: Stephanie Mau]

An inexpensive, low-tech way to fight fraud

Tips are your best fraud prevention | Whistleblower SecurityYou might think that when it comes to fighting fraud in the workplace, that the best methods are too expensive, too high-tech, or too complicated. 

Turns out, the best way to fight fraud actually starts with a tip.

According to a recent study by the Association of Certified Fraud Examiners (ACFE), 42% of fraud cases in 2012 and 2013 started with a tip – most of which were from employees themselves. 

So why is it that only half of U.S. organizations have fraud hotlines in place? You’d think that when employee fraud is as costly as it is – it’s estimated to cost $3.7 trillion each year, globally – that such a cost-effective and low-tech method would be in high demand.

So how effective are whistleblower hotlines?

The ACFE’s 2014 Global Fraud Study surveyed 1,483 cases of fraud from companies, non-profit companies, and government organizations from all over the world. 

They found that in cases where the fraud was detected by accident, the fraud lasted an average of 32 months and cost the company a whopping $325,000. But in cases where the fraud was detected through a tip, it lasted a median of 18 months and only cost $149,000.Tweet This Stat That’s a whole lot of time and money saved just by blowing the whistle. 

One of the co-authors of the study, Andi McNeal, stresses the importance of whistleblower hotlines, saying that “there’s a lot more fraud that could be detected if organizations were harnessing this one mechanism.” 

The most effective way to protect your workplace from fraud is still through active reporting and review systems. Companies that have an active monitoring program have significantly fewer losses, as they are usually able to catch the crime earlier.

It starts with you

However, it’s important to remember that a fraud hotline is only useful if the employees are encouraged to come forward, and the company is willing to follow up. Establishing a healthy whistleblower culture in your workplace is the first step.

Source: http://www.businessweek.com/articles/2014-08-11/to-stop-fraud-employee-tip-hotlines-are-remarkably-effective

Topics:  Best Management Practices, Employer Liability Issues, Fraud, Whistleblower Hotlines, Whistleblowers

Published In: General Business Updates, Labor & Employment Updates

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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