According to the Association of Certified Fraud Examiners (ACFE), tips — particularly those made through anonymous hotlines — are the most effective method of uncovering occupational fraud. While the mere existence of a hotline can prompt second thoughts in employees tempted to commit fraud, it usually is not enough to encourage reporting of fraudulent activities.
Confidential & convenient
Ensuring that employees feel comfortable using your fraud hotline is critical. First, it must be available 24 hours a day, seven days a week. Few employees will risk making reports during work hours when co-workers might overhear them.
Also, the hotline should be more than a voicemail system that forwards calls to someone in the company. Employees are more likely to speak freely to a third party or a trusted individual within your company. Personnel monitoring the line should be trained to ask questions and gather information necessary to mounting an investigation. Do not be tempted to use caller ID or other identifying features. The perception that calls are not anonymous will discourage reports.
Indeed, stress the confidential nature of your hotline to employees and reassure them that callers will be protected against possible retaliation. Also, explain what callers must provide when reporting suspected wrongdoing. You can communicate this information in your employee handbook and company newsletter, on your intranet, and in employee breakrooms.
To demonstrate you take anonymous tips seriously, track complaints, investigate them thoroughly, and report their dispositions not just to internal audit personnel, but to the whole company. Without revealing details, indicate the number of reports you receive each month or quarter and how many disciplinary or legal actions result from them. If you also report the number of tips that proved to be unfounded, and why, you may be able to discourage frivolous attempts to discredit innocent co-workers.
Finally, remember that a hotline is just one factor in your overall fraud prevention efforts. You also need a company culture that actively discourages fraud from the top down, as well as a strong set of internal controls to make fraud difficult to perpetrate in the first place.
You are responsible for setting the ethical tone of your company, which includes providing a mechanism for employees to report suspected illegal behavior. Contact us for help establishing an anonymous reporting system.