Fraud Prevention Tip #13: Anonymous Reporting Hotlines

Fraud Prevention Tip #13: Anonymous Reporting Hotlines

In our fraud seminars, we cover the three levels where organizations must be ready to deal with fraud. They are:

Level 1 – Fraud Deterrence and Prevention
Level 2 – Early Fraud Detection
Level 3 – Effective Fraud Incident Handling

Questions about Hotlines fall heavily in Level 1 by creating the belief in those tempted to cheat that co-workers and others are watching and can easily report them, and Level 2 by establishing a means for those with concerns to come forward easily and anonymously.

Protecting Your Most Vulnerable Employees

Hotlines are especially important to first and second level employees – who account for most of the headcount in large organizations. In general, middle managers and executives don’t need a Hotline to report what they know or suspect although there are certainly exceptions.

So we’re implicitly targeting a Hotline at the most vulnerable employees – those at the mower-end of the organization chart. They are usually the ones most afraid of losing their jobs and most concerned about being identified by co-workers and immediate supervisors as someone who ‘doesn’t play along’. They often fear ‘not fitting in’ if they report suspicions, even if they are never identified as the source. While official ‘non-retribution’ policies are good on paper, they usually do little to ease the uncertainty of lower-level staff members who have suspicions to report.

Over many years and more cases than I care to count, I have a common conclusion. More often than not when fraud is finally detected, someone else knew or strongly suspected and didn’t speak up. Management will often say, “They all knew – but they didn’t call! And I can’t imagine why!”

Here are the reasons why people don’t speak up:

Fraud Prevention Tip #13: Anonymous Reporting Hotlines

The goals of anti-fraud efforts are prevention and immediate detection. While no anti-fraud system is foolproof, the 8 ideas in this program are critical to managing fraud risks in your business. And there is a cumulative effect – the more of them you apply in any business, the greater the chance of success. Providing turn-by-turn instructions for business leaders and owners, this program is short on theory and long on practical ‘how-to’ instructions on what you should do and what gets in the way. You’ll benefit by building a stronger defense against the risks of wrongdoing, misconduct, theft and outright fraud. Using the tools, checklists, talking points, and sample anti-fraud policies included in the program, you’ll be able to apply the ideas right away with minimal cost and maximum effect.

• It’s none of my business
• It’s not my job to speak up
• The schoolyard mindset – where as children we learn not to ‘rat out’ friends
• Fear – real or imagined
• There’s no upside for me. Only problems.
• I won’t fit in anymore
• I’ve never been asked to told to speak up

To the experienced executive, these excuses often appear trivial. But to the employee who believes them, they are very real indeed.

So – if we want the most vulnerable people to step forward, we must break down any barriers that reduce the likelihood that they will do so. Theoretically, an Anonymous Reporting Hotline makes speaking up about suspicions easier or at least more palatable. But the existence of a Hotline isn’t enough – as has been evidenced by the thousands of organizations that have them but never get calls.

Just as important are management’s constant efforts to help people to feel safe about reporting. Perhaps by calling those who call ‘heroes’ instead of ‘whistle-blowers’.

The core message for everyone to hear is:

“We have fraud risks just like every other business. While we all need to fight this problem, you – our great employees – are the first and best line of defense. We need to work hand in hand with you to protect our resources and our reputation, and we all need to speak up when we SUSPECT something might be wrong.

You can speak up in a number of ways. You can write us a letter. You can call my phone number after hours and leave a message. You can talk to your supervisor, or our legal, HR or compliance staff if you are comfortable doing so. You can cut the words out of the Sunday paper or a magazine and tape them together like a ransom note!

Or if you prefer, we’ve set this tool up where you can call (or email?) anonymously. Here’s exactly how this Hotline tool works…(who answers it, how anonymity is protected, what a typical call actually sounds like – anything that can take some of the mystery out of the equation for someone who is uncertain about picking up the phone. The more explicit, the better.).

But however you do it – If you see something, say something.”

Why not give that script to the CEO or other very high-ranking executive. Have them refer to the cases that were found when the calls came in a year ago, and make sure they refer to the anonymous callers as ‘true heroes’. I know it sounds a bit sugary for a leader to say, but it’s true and it works. It’s all about framing the beliefs of the employees in a positive manner. As with so much of any Anti-Fraud Campaign, balance is key.

Remember – it’s a campaign, not an event. Employees need to be reminded regularly that they have a responsibility and permission to speak up. Let’s make it easy for them to do so.

John J. Hall, CPA

John J. Hall, CPA

John J. Hall, CPA, is an author, speaker and results expert who presents around the world at conventions, corporate meetings and association events. Throughout his 35-year career as a business consultant, corporate executive and professional speaker, John has helped organizations and individuals achieve measurable results. He inspires audience members in corporations, not-for-profit organizations and professional associations to step up, take action and “do what you can.”

 

 

Fraud Prevention Tip #12: Issue a “Policy on Fraud Responsibilities”

Fraud Prevention Tip #12: Issue a “Policy on Fraud Responsibilities”

Here’s a challenging question from a recent client meeting. “John, what are the three most important components of an Anti-Fraud Campaign?”

In this series of articles, you’ll read 40 ideas for action. But the top three? That’s easy.

• Number one is Visible, Vocal, Active Support by the CEO. This was covered in a previous article. But here’s a summary of the four key points:

1. The #1 executive must lead the anti-fraud charge.
2. They must be willing to speak publicly and enthusiastically about the initiative.
3. They must provide you with the resources you need to initiate and sustain the Anti-Fraud Campaign.
4. They must embrace the belief that fighting wrongdoing and fraud is a campaign waged over time with their continued support. It is not a once and done event that receives encouraging words but no meaningful follow-though a few weeks or months later.

• Number two we cover right here. Issue a Policy on Fraud Responsibilities.

• Number three – give all employees meaningful Fraud Risk Management Skills Training – we’ll cover in a future article in detail, so stay tuned.

Fraud Prevention Tip #12: Issue a “Policy on Fraud Responsibilities”

“You can achieve so much by simply doing what you can – right here, right now.” As a fact-based businessman and Certified Public Accountant, I like the world to make sense. I’ve spent many hours with corporate leaders, company owners, and other hard working men and women discussing their challenges and goals. I’ve seen hundreds of people reach their goals – and just as many fail. And there’s a pattern!

I’ve always been a fan of the old expression “one-two punch”. But I REALLY like the idea of a “one-two-three knock-out punch combination”. These three ideas give you just what you need to knock out fraud in your organization.

Critical Components of a Policy on Fraud Responsibilities

A Policy on Fraud Responsibilities is not the same as a Code of Conduct (although there may be some overlap). The Code states what to do and what to avoid in conducting business.

A Policy on Fraud Responsibilities is positively-worded ‘call to action’ that explicitly recruits every employee, manager, executive and Board member to your Anti-Fraud Campaign. Here is the minimum content I would want to see.

Our goal is to establish and maintain a business environment of fairness, ethics and honesty for our employees, our customers, our suppliers and anyone else with whom we have a relationship. To maintain such an environment requires the active assistance of every employee and manager every day.

All have a responsibility to report suspected violations.

However, employees with supervisory and review responsibilities at any level have additional deterrence and detection duties. Specifically, personnel with supervisory or review authority have three additional responsibilities.

• First, you must build and maintain awareness of what can go wrong in your area of authority.
• Second, you must put into place and maintain effective monitoring, review and control procedures and behaviors that will prevent acts of wrongdoing.
• Third, you must put into place and maintain effective monitoring, review and control procedures and behaviors that will detect acts of wrongdoing promptly should your prevention efforts fail.

Authority to carry out these three additional responsibilities is often delegated to subordinates. However, accountability for their effectiveness cannot be delegated and will remain with supervisors and managers.

Be sure to emphasize required reporting of suspicions. Fraud Risk Management experts should handle suspicions; not employees and supervisors.

And if it’s consistent with your culture and policies, take it a step further and require annual certification where every employee states that they are not aware of or suspect wrongdoing by others.

John J. Hall, CPA

John J. Hall, CPA

John J. Hall, CPA, is an author, speaker and results expert who presents around the world at conventions, corporate meetings and association events. Throughout his 35-year career as a business consultant, corporate executive and professional speaker, John has helped organizations and individuals achieve measurable results. He inspires audience members in corporations, not-for-profit organizations and professional associations to step up, take action and “do what you can.”

 

 

business behavior

Fraud Prevention Tip #11: Define Acceptable Behavior

Janice is a compliance officer for a large multi-national energy company. During a full day of Fraud Risk Management training for her organization, she asked a great anti-fraud question.

“How far should we go in defining business behavior?”

Answer: far enough to remove any doubt about what’s acceptable and what crosses the line as unacceptable.

Here are a few suggestions for putting action behind defining acceptable and unacceptable behavior.

1. Define who you are.

Anti-fraud efforts are built on a solid, observable, ethical foundation. Step one is defining who you are as an organization in your policies, in your marketing messages and materials, in the words your leaders say publicly and inside to the employees, and in the way you treat your suppliers, contractors, customers and all other stakeholders – including regulators and the public.

2. Set an example.

Every employee including executives must intentionally display positive behavior in how they act while conducting business and even how they carry themselves. Be observant. Ask, “What do others see when they witness our behaviors? Do they see honesty, pride, respect and fairness? What should we adjust individually and collectively to completely integrate our policies and our actions?”

Fraud Prevention Tip #11: Define Acceptable Behavior

As the business experts they are, professional auditors must have outstanding technical skills. But they must also be expert at communicating their ideas, influencing managers and employees, and driving change – all while demonstrating both real and perceived value. Traditional audit training is heavily focused on technical and audit reporting issues, but what about auditor communication, behavior and interpersonal skills. Things like building rapport and trust, interviewing and presenting confidently, and selling our ideas. While we all agree that sound technical skills are required for auditor effectiveness, the mastery and daily application of communication and interpersonal skills are just as important. This seminar teaches participants how to master critical communication and interpersonal skills needed by all auditors.

Here’s why: when there is any disconnect between words and deeds in setting the tone, deeds always win. Always.

3. Spell out acceptable behaviors in a useful Code of Conduct

You have to define acceptable behaviors – explicitly. In writing. Your Code of Conduct should clearly describe who you are and how you conduct yourselves in everyday activities.

Employees, vendors, contractors and others need to know what’s allowed. They also need clear guidelines on what will be judged as unacceptable. And they should be told to speak up and ask questions about any situation not covered by the Code.

I’m confident that if you’re reading this article, you’ve probably already got a strong Code. But it never hurts to see what others have out there and how you might tweak your Code to make it stronger and more user friendly. There are many examples of outstanding Codes available with a five-minute Internet search.

4. Tell third parties.

It’s not just telling employees about your behavior standards. It’s also about telling all the third parties you allow in as partners for your success. Contractors, vendors, agents, customers, joint venture partners, supplies all need to know how to behave when doing business with you. A great practice it to make your Code of Conduct part of any documents that evidence your relationship with third parties. Say to vendors, “I don’t know what your Code is. Here’s ours, and you’ll have to abide by it to do business with us.

5. Spell out restrictions on gifts and entertainment.

This idea is short and to the point. Make sure your employees and all third parties know the restrictions on gifts and entertainment and any penalties for breaking those rules. Encourage everyone to ask questions before accepting gifts or entertainment that bumps up against or exceeds stated limits. Transparency is the key to success. Say, “When in doubt, talk it out.” That’s good advice!

Five quick suggestions for you to consider. Give your organization (or clients) a rating on all five right now. If you don’t measure up on all of them, decide what could be done differently right away to bring behavior into alignment with expectations.

John J. Hall, CPA

John J. Hall, CPA

John J. Hall, CPA, is an author, speaker and results expert who presents around the world at conventions, corporate meetings and association events. Throughout his 35-year career as a business consultant, corporate executive and professional speaker, John has helped organizations and individuals achieve measurable results. He inspires audience members in corporations, not-for-profit organizations and professional associations to step up, take action and “do what you can.”

 

 

Fraud Prevention Tip #10: All Employees Must Be Actively Recruited into Anti-Fraud Campaigns

Fraud Prevention Tip #10: All Employees Must Be Actively Recruited into Anti-Fraud Campaigns

First level employees, their supervisors and mid-level managers are your most important line of defense against fraud. All must be actively recruited into your Anti-Fraud Campaign.

Here are three flawed beliefs that often get in the way. All must be addressed openly for your Anti-Fraud Campaign to work.

1. Fraud prevention is common sense.

Leaders who say, “You know, fraud prevention is just common sense” make me very nervous. They don’t understand. They have a blind spot in their thinking that blocks progress and harms your anti-fraud efforts.

The fact is most employees have no meaningful knowledge of fraud prevention and quick detection techniques relevant to their work responsibilities. They

Fraud Prevention Tip #10: All Employees Must Be Actively Recruited into Anti-Fraud Campaigns

John Hall and all Hall Consulting instructors are available to lead your training and seminar events. We work side-by-side with our clients to create, tailor and lead outstanding skills training programs. In addition, Hall Consulting is registered with the National Association of State Boards of Accountancy (NASBA) as a sponsor of continuing professional education on the National Registry of Continuing Professional Education Sponsors – so your training event may qualify for CPE credit as well!

must be taught because it’s not a core skill they bring to the job. How to prevent fraud isn’t something we learned in high school, college or post-graduate training.

There is an assumption that in a professional setting and in any corporate, not-for-profit or education organization that employees already know how to manage fraud risks. It is a dangerously flawed assumption in most cases, and it can be easily fixed with some ‘how-to’ skills training by supervisors and anti-fraud experts.

2. Fraud is too negative to discuss with employees.

I know this belief is flawed because every single time I am engaged to provide anti-fraud skills training, someone will come forward and ask, “Why did the company leaders take so long to tell us this?”

It’s not too negative to discuss. In fact, your team will thank you for giving them the tools to help. By bringing fraud risks out into the open and addressing them in a positive way, it’s not negative at all. Employees want to be part of the solution. All you have to do is ask for their help and show them how. They will respond positively every time.

3. We’ll scare everybody.

You know what? Talking about it openly may scare a few people if what you mean is ‘scare them into action’ by bringing fraud risks to their conscious level and giving them tools to fight. It may make them nervous and put them briefly on the edge of their seat. Not in a negative way. But in a way that gets them emotionally involved in the discussion. Don’t scare them though fear techniques, but don’t back away from a healthy discussion about what can go wrong and how they can help.

Again, they will respond and help – if you ask and show them how.

John J. Hall, CPA

John J. Hall, CPA

John J. Hall, CPA, is an author, speaker and results expert who presents around the world at conventions, corporate meetings and association events. Throughout his 35-year career as a business consultant, corporate executive and professional speaker, John has helped organizations and individuals achieve measurable results. He inspires audience members in corporations, not-for-profit organizations and professional associations to step up, take action and “do what you can.”