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:

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, 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.”