Whistleblowing and the New Race to Report - Deloitte Forensic Center


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The Dodd-Frank Wall Street Reform and Consumer Protection Act has created rewards of 10 to 30 percent of monetary sanctions for whistleblowers who report to the Securities and Exchange Commission (SEC) original information leading to securities law enforcement actions that recover more than $1 million.

Press releases announcing settlements by the SEC in the first seven months of 2010 show how large future rewards for whistleblowers could be.

In addition, changes to U.S. Federal Sentencing Guidelines may lead to a reduction in organizational sentences when the organization has an effective compliance and ethics program that incorporates direct reporting obligations from the head of the compliance program to the board of directors or audit committee.

These two developments provide a significant motivation for organizations to drive the effectiveness of their whistleblower system to as high a level as is feasible. This paper explores steps organizations can take to enhance their whistleblower systems and help mitigate their risks.

Learn more by reading Whistleblowing and the New Race to Report: The impact of the Dodd-Frank Act and 2010's changes to U.S. Federal Sentencing Guidelines, available for download above

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Whistleblowing and the New Race to Report - Deloitte Forensic Center

  1. 1. Whistleblowing and the new race to report The impact of the Dodd-Frank Act and 2010’s changes to U.S. Federal Sentencing GuidelinesDeloitte Forensic Center
  2. 2. “Two backpackers are hikingthrough the woods when suddenlythey see a huge bear staring at themhungrily. Janet quickly removesher muddy hiking boots and startsputting on her running shoes. Johnwhispers, ‘Janet, you’ll never outrunthat bear, so why put those on?’‘Well John,’ replies Janet, ‘I don’thave to outrun the bear. I only haveto outrun you.”Anon Whistleblowing and the new race to report 2
  3. 3. Another development is the changes to the U.S. FederalSection 922 of the Dodd-Frank Wall Street Sentencing Guidelines (‘Guidelines’) that took effect on November 1, 2010. One amendment increases theReform and Consumer Protection Act created opportunity for a reduction in organizational sentencesrewards of 10–30 percent of monetary sanctions when the organization has an effective compliance and ethics program incorporating direct reporting obligationsfor whistleblowers who report to the SEC from the head of the compliance program to the board oforiginal information leading to securities law directors or audit committee. This includes reporting “no less than annually on the implementation and effectivenessenforcement actions that recover more than $1 of the compliance and ethics program.”million. This could increase corporate This amendment creates a substantial incentive forregulatory risks considerably and create a ‘race organizations to alter, where necessary, the reporting lines for the head of their compliance and ethics programto report’ to the SEC. and formalize annual assessments of the organization’s compliance and ethics program (including its whistleblower Press releases announcing settlements by the Securities & system), with a report being provided to the board or audit Exchange Commission (SEC) in the first seven months of committee. 2010 show how large future rewards for whistleblowers could be. In July 2010, the SEC settled three securities The combination of the Dodd-Frank Act and the cases with recoveries of $550 million, $100 million, and amendments to the Guidelines also creates a strong $75 million. Another case settled in February for more than incentive for organizations to drive the effectiveness of $300 million. their whistleblower system to as high a level as is feasible. The goal would be not just to comply with the minimum Foreign Corrupt Practices Act (FCPA) cases have also standards of the Sarbanes-Oxley Act, where applicable, generated large settlements in 2010, with one around but to encourage reports of potential wrongdoing to be $450 million, two others exceeding $300 million, and one made internally. This, with other improvements to the of nearly $200 million, including related payments to the whistleblower system, could allow issues to be resolved U.S. Department of Justice. at a lower cost, with the organization potentially gaining the benefit of smaller penalties that can arise from self- Had the Dodd-Frank Act applied to these cases, the reporting corporate wrongdoing to the authorities. rewards could have ranged from $7.5 million to $165 million. While monetary reward is not the only motive Encouraging employees and others to use the for whistleblowers, it represents a strong incentive organization’s whistleblower system to report potential for an employee to call the SEC and provide “original wrongdoing, in preference to contacting the authorities information.” directly, can involve actions in multiple areas. According to the Deloitte 2010 Ethics & Workplace This paper explores “Ten things about whistleblowing,” Survey, the recession has diminished two important forms discussing steps organizations can take to enhance their of business currency—trust and ethics. Nearly half (48 whistleblower systems and help mitigate their risks in light percent) of employed Americans who plan to look for of the Dodd-Frank Act and 2010’s changes to the U.S. a new job when the economy is more stable cite a loss Federal Sentencing Guidelines. of trust in their employer as a result of how business and operational decisions were handled over the last two years as a reason for leaving. Thirty-one percent of employees say that their colleagues are more likely to behave unethically at work in this environment. So trust is down and wrongdoing up just as the SEC introduces large whistleblower rewards. Whistleblowing and the new race to report 1
  4. 4. 1. Tips appreciated Personal reporting or ‘whistleblowing’ in one form or Some communication method is needed to get information another is given strong emphasis in establishing a strong about potential wrongdoing from those who have it ethics and compliance culture and framework for several (often mid-level or junior employees) to those who are reasons, including: most willing and able to act appropriately on it without • Tips are the number one way in which frauds are interference from those potentially involved. If middle detected according to the Association of Certified management appears to be involved, informing senior Fraud Examiners (ACFE) 2010 Report to the Nations on management may be sufficient. But if senior management Occupational Fraud and Abuse. “Three times as many may be involved, people need a way to inform the audit frauds in our study were uncovered by a tip as by any committee or the board of directors. other method,” they reported. In the entities the ACFE studied that had hotlines, 47 percent of frauds were Whistleblowing is an activity that can involve any form detected by tips, while in entities without hotlines that of communication, not only use of a special telephone figure was 34 percent. So hotlines are not essential to hotline, but also e-mail, Web form, regular mail, fax, get some fraud tips, but hotlines can help you get more telephoning the company’s headquarters, or simply tips and detect more fraud. speaking up to a supervisor, manager, human resources specialist, or other trusted person. • In the same ACFE study, entities that had hotlines suffered a median fraud loss 59 percent smaller and the frauds lasted on average seven months less than at entities without hotlines. • Senior management is often involved in the more serious incidents of unethical behavior, fraud and corruption. An employee who becomes aware of potential wrongdoing involving senior management may not know other members of management to whom this information could be reported; or they might not have confidence that other members of management would be willing and able to take appropriate action. Without a whistleblower reporting mechanism to reach the board of directors or audit committee, people might not feel able to report high-level wrongdoing internally. Whistleblowing and the new race to report 2
  5. 5. 2. Don’t get distracted by noise Approximately half of whistleblower calls are typically an investigation to take place. So in the vast majority of related to personnel issues. This fact is sometimes misused cases, the whistleblower reports relate to matters that to criticize hotlines for generating a lot of ‘noise’ or are sufficiently important to warrant investigation. While non-serious reports and being an administrative nuisance. only 40 percent of the investigations reported in this study But typically most of these reports can be passed along led to corrective action, this may be due in part to the directly by the hotline operator to the human resources burden of proving wrongdoing not being able to be met function to be resolved in the same way as if the HR team in some cases. For example, when evidence is destroyed, had been contacted directly. Such reports needn’t incur it may be hard to prove that a violation of the code of significantly different cost just because they came through conduct occurred, even if circumstantial evidence suggests the whistleblower system. Normally, senior management, that it has. When you think about what is involved in the board of directors, and the audit committee do not finding proof of wrongdoing, 40 percent of investigated need to receive or read most of these reports. When allegations actually seems pretty high. personnel issues are deemed to be serious, such as alleged sexual harassment or discrimination, the legal function may The other thing to consider about the ‘noise’ factor with take the lead in resolving the cases. whistleblower systems is called the ‘asymmetric loss function.’ In essence, this means that the potential cost of Another ‘red herring’ argument against whistleblower failing to detect significant wrongdoing can outnumber reporting systems is that many people will file false many times over the cost of investigating false alarms. allegations and that time and money will be wasted That’s why many teams of firefighters are typically investigating them. Many organizations have a policy that dispatched automatically to a fire alarm in a high-rise making reports through the organization’s whistleblower building. There is a chance it is a false alarm, but if they system in bad faith is subject to disciplinary action, waited until a fire had been confirmed before responding, potentially including termination. That appears to be an many lives could be lost by the time firefighters arrived. effective deterrent. While major allegations (such as those involving fraud or corruption) rarely involve loss of life, a timely investigative Yet another alleged downside of whistleblower systems is response is prudent given the potential financial and that they generate many reports about nothing important. reputational costs that can be at stake. The 2010 Corporate Governance and Compliance Hotline Benchmarking Report suggests otherwise. In this study of In summary, while there may be some ‘noise’ with a approximately 117,000 whistleblower reports received by whistleblower system the trick is not to let it distract you hotline operator The Network in 2009, for those reports from what is truly important. where the case outcome was provided, 73 percent of whistleblower reports warranted investigation; only 17 percent did not. Another 7 percent were referred to others to be answered and 3 percent were resolved in other ways. Of the 17 percent that did not warrant investigation, experience suggests that a good proportion may simply not have provided sufficiently detailed information to allow Whistleblowing and the new race to report 3
  6. 6. 3. Is your hotline just lukewarm? When many organizations launched hotlines in response to • Focus groups — Selected individuals can be invited to the Sarbanes-Oxley Act or otherwise, the initial emphasis discuss, in a facilitated group setting, their viewpoints was often just on having such a reporting mechanism. on the entity’s hotline system. The facilitator, selection More recently, SEC guidance and 2010’s changes to the of participants, and group dynamics are extremely Federal Sentencing Guidelines have placed emphasis on important to fostering an open and candid discussion. assessing the effectiveness of the hotline, which often serves as a key entity-level internal control. • Exit interviews — While some departing employees Organizations can fall into a trap of assuming that no may prefer to say nothing, others may be willing to share news is good news — that having few or no calls to the concerns about the whistleblower system or knowledge hotline means that there is little or no wrongdoing going of unreported violations of the organization’s policies. on. Experience suggests that low call volume is more likely to indicate opportunities to improve various aspects of the • Feedback from hotline users — Feedback can be hotline system. obtained, even from anonymous hotline users, about the usability of the mechanism, how the complaint was dealt Seven ways to take a hotline’s temperature with, how long it took to complete the investigation, etc. While there is a lack of authoritative guidance on how Remember that this will not include input from people hotlines should be evaluated, the following activities can who have never used the hotline. help to assess hotline effectiveness: • Anonymous employee surveys — Periodic employee • Interviews — Internal auditors can ask employees their ethics surveys can help to gauge employee awareness views on the whistleblower hotline during regularly of and confidence in using the hotline. The survey’s scheduled audit visits. wording can significantly impact results, as can organizational culture. Comparing results over time and • Incident logs — Violations of the organization’s policies between operating units can be very instructive. that are logged by the legal, HR, or other functions but which were not reported through the hotline may display • Benchmarking — Certain hotline metrics can be a pattern of underreporting. benchmarked against industry statistics for call volume, call mix, and other key measures. Deviations from industry averages can be probed to identify opportunities for improvement. Whistleblowing and the new race to report 4
  7. 7. 4. Carrots may help you hear better As we stated in the introduction, the Dodd-Frank Wall Whether organizations will offer rewards similar to those Street Reform and Consumer Protection Act of 2010 offered by the government remains to be seen. It may includes a provision for substantial incentives for those who not even be necessary to pay as much, since many well- provide original information to the SEC about securities law known whistleblowers have clearly been motivated by violations leading to monetary recoveries over $1 million. principle rather than by monetary reward. But it would not This new law highlights the perceived role of incentives in be surprising for audit committees or boards of directors encouraging whistleblowing in general. to decide that not providing incentives for whistleblowers might be a risky strategy in light of the Dodd-Frank Act’s Exactly how to incentivize employees to ‘speak up’ is rewards. something that a number of organizations have struggled with and where little consensus has been established. Some form of carrot is important — whether directly or indirectly related to individual reports of wrongdoing. One school of thought is that ‘speaking up’ is expected Examples of indirect, long-term incentives would be as part of each employee’s day-to-day conduct and no incorporating ethics and integrity into the performance incentive should be necessary. evaluation process and rewarding exemplary ethical conduct and behavior. Examples of more direct short- Another school of thought is that in order to increase term incentives would be giving a monthly award for the probability of employees ‘speaking up’, incentives an employee that demonstrated strong ethical decision- should be provided to whistleblowers. After all, many making or providing a financial reward for any tip that organizations recognize or reward employees who have leads to identification of significant unethical behavior, perfect attendance even though showing up is a basic fraud, or other misconduct. part of everyone’s job. And top salespeople are often rewarded with large bonuses and rewards even though Clarity, fairness and generosity of rewards can help to their day-to-day job is to sell. So perhaps rewarding attract employee support and generate more reliable whistleblowers who help to identify and put a stop to reports. While some rewards might be widely published wrongdoing is simply giving a bonus to someone who internally, such as stopping a costly vendor fraud, others makes a significantly above average contribution to the may be much more sensitive internal matters. In those organization. cases, choosing the “no publicity” option may be wise. You can always communicate to employees using a mechanism There is a third school of thought. It is simply that that is popular (such as an employee newsletter) that “an rewarding whistleblowers may be necessary in order employee” (no name) received “a reward” for a report that for organizations to compete effectively with the U.S. enabled the organization to stop certain ongoing violations government’s tempting rewards for tips relating to of company policy. securities violations. An organization that generously rewards whistleblowers is likely to get more reports going to its own whistleblower system and fewer going directly to the authorities. Whistleblowing and the new race to report 5
  8. 8. 5. Protecting those who serve Whistleblowing requires courage. Someone with Given how valuable whistleblowing can be in deterring knowledge of unethical practices may think hard about and detecting wrongdoing, it would be prudent for an whether to blow the whistle and, if so, how best to do organization to create a supportive environment for so. Whistleblowers are often principled people who are whistleblowers. Measures an organization can take to do willing to take a stand against wrongdoing, but even so this include: they may fear potential retribution, whether from the • Developing meaningful rewards for whistleblowing. organization’s senior management or from co-workers. In some economies or geographies, people may not be • Implementing a detailed non-retaliation policy protecting able to walk straight into another job. So concerns about whistleblowers who make reports in good faith. possible personal impact can be very real. • Communicating this policy in the employee code of There have been several cases where whistleblowers have ethics, orientation and periodic refresher training, hotline not been treated fairly by organizations after making posters, employee newsletters, ethics and compliance their report. Organizations have to overcome this legacy communications, and periodic speeches from senior if whistleblowers are to be persuaded to report internally management. rather than directly to the authorities. • Designating a central function or person, such as the Half of whistleblower calls in 2009 were anonymous, corporate compliance and ethics officer, to monitor the according to the major hotline study mentioned earlier career progression, compensation, and any proposed in item 2, suggesting that many employees still fear to disciplinary actions against whistleblowers for a period of speak up openly. Anonymity can inadvertently lead to time (such as three years) after a whistleblower report is mishandling of investigations by focusing on unmasking made. This person can also be designated to receive and the whistleblower, which can lead to unlawful retribution, to investigate any complaints of retribution. or by discounting anonymous allegations so they are not properly investigated, as shown in a recent academic • Implementing a records retention policy for paper, “Effects of Anonymous Whistle-Blowing and whistleblower reports, complaints and investigations. Perceived Reputation Threats on Investigations of Whistle- Blowing Allegations by Audit Committee Members,” • Training senior management about the whistleblower reported in the Journal of Management Studies online in policies, especially non-retaliation. February 2010. This academic experiment, involving 83 experienced audit committee members, found that audit committee members attributed lower credibility and allocated fewer investigative resources to whistleblower reports that were received through an anonymous versus a non-anonymous channel. This finding suggests a potential opportunity for audit committees to enhance the way in which anonymous whistleblower reports are evaluated and addressed. Whistleblowing and the new race to report 6
  9. 9. 6. Communicate, communicate, communicate A successful whistleblower system requires effective • A second aspect is raising awareness about the communication to create and maintain employees’ existence of the whistleblower system. Here frequent awareness of the hotline’s existence, build willingness to reinforcement and visibility is needed. A good goal is for use it, and develop employees’ ability to identify potential employees, vendors, customers and other third parties wrongdoing. to know about the system and when they should use it. It can also be made clear that not reporting known According to the Ethics Research Council’s 2009 National wrongdoing is a violation of the organization’s policy and Business Ethics Survey, 63 percent of employees surveyed will be subject to disciplinary action. said they had reported misconduct when they saw it. That is up from 58 percent in the 2007 survey but still leaves 37 • A third aspect is emphasizing to employees that percent of employees not reporting observed misconduct. whistleblower reports can be anonymous if they wish, that reports made in good faith will not lead to Training, both live and online, is key to raising retribution and that reports will be acted upon promptly whistleblower system awareness. Other means include: with appropriate steps being taken. One thing to note is • Posters in the workplace that laws in certain European countries, such as France, limit the use and discourage the emphasis of anonymity • Mentions on invoices, purchase orders, paystubs, for whistleblower reports, so tailored messages may be remittance advices, check stubs, and other business needed for employees there. documents Employee confidence in the system is paramount to the • Employee and supplier codes of ethics success of a whistleblower system. Communicating and monitoring compliance with the entity’s non-retribution • Intranet and public Web sites policy can help to allay fears. It may also be beneficial to publish internally suitably anonymous examples of where a whistleblower system report led to an investigation and • Verbal emphasis by senior leadership appropriate disciplinary action against those found to have violated the organization’s policies. In addition, having • Employee newsletters and broadcast compliance and senior executives, including the CEO, participate in some ethics e-mails of the system awareness communications can demonstrate their support. Three key aspects of whistleblower system awareness Communication can establish a strong ethical tone at the • A key aspect of system awareness is educating organization and illustrate how seriously the organization employees about the red flags, risks and schemes related takes any reports coming through the whistleblower to unethical or illegal behavior including topics such as system. conflicts of interest, bribery, kickbacks, embezzlement, financial statement manipulation, and fraudulent regulatory reporting. This type of awareness can be part of a fraud risk management or ethics and compliance awareness program. It is important to explain that every employee has a role in preventing and detecting fraud and that the hotline system is a key tool for people to use for that purpose. Whistleblowing and the new race to report 7
  10. 10. 7. Open wide “Open wide,” says the dentist. “Wider.” The wider you • Constituencies — While many organizations have open your mouth, the easier it is for your dentist to focused on providing a whistleblower reporting system see what is going on, identify potential problems early, just for employees, only 49 percent of the tips in and take action to keep your teeth in good shape. the ACFE’s 2010 fraud study mentioned earlier were Whistleblower systems work in a similar way. When access identified as coming from employees. Another 38 is restricted, it is harder for people to report potential percent came from external sources such as customers, wrongdoing. Issues can fester until they cause such pain vendors, shareholders, competitors, and the perpetrators’ that action has to be taken. acquaintances. The remaining 13 percent were anonymous. Encouraging these other constituencies to Whistleblower system access can sometimes be restricted use your system could generate more good tips. consciously by executives who may be fearful of having to respond to more allegations if they “open wide.” • Methods — Live phone calls make asking clarification More often, access is restricted unconsciously through questions easier. But not all whistleblowers are use of a design that inadvertently doesn’t reflect some of comfortable reporting that way. Preferred methods vary the lessons learned in recent years about whistleblower by country and culture. Also, a major hotline operator systems. reported in 2006 that 77 percent of its anonymous whistleblowers used a Web-based reporting mechanism. Four potential barriers to whistleblowing So offering multiple methods of reporting (such as • Service hours — Many early whistleblower systems phone, e-mail, Web form, fax, and letter) can help to consisted of a phone number that employees could call generate more tips than just a hotline or e-mail system during business hours. It may have gone to a compliance on its own. officer or an internal auditor at the head office. However, according to one major hotline operator, these days almost 50 percent of calls are received outside business hours. Whistleblowers may be reluctant to make hotline calls from the workplace where they could easily be overheard, have their name show up on caller ID, and be tracked in telephone call logs. So enabling access 24/7 can help to increase calls. • Languages — Whistleblower reports are sensitive and tricky things to communicate, so not being able to use one’s preferred language can deter whistleblowing or adversely impact a report’s completeness and accuracy. For many organizations today, the ability to take reports in many different languages may be a necessity not a luxury. Whistleblowing and the new race to report 8
  11. 11. 8. What’s in a name? The term ‘helpline’ tends to be viewed as a more invitingWhat’s in a name? That which we call a rose name that may be less intimidating for an employee to use. It encourages the caller to treat a matter more as anBy any other name would smell as sweet. item in which they are seeking advice or clarification on an issue. Romeo and Juliet (II, ii, 1-2) The ‘helpline’ may also promote calls from employees who William Shakespeare may not be sure whether something that they observed is unethical or against the code/law and may not have otherwise called a ‘hotline.’ Juliet’s idea that names really do not matter proved to be naive and her love for Romeo ill-fated. For she was a This approach can also facilitate the consolidation of Capulet and he was a Montague; the names of the two multiple hotlines and helplines into one covering a variety warring families could not be overcome. of issues. Aside from potentially simplifying business processes, this can give employees experience in using Can the name or title of a whistleblower ‘hotline’ make a the line for day-to-day matters, building trust, and making difference? Experience suggests it may. Despite the heroics them more willing to call should a serious matter arise. and undeserved suffering of many past whistleblowers, the term ‘whistleblower’ may have negative connotations in some people’s minds, for cultural, historical, and other reasons. In companies with unions, a ‘whistleblower’ hotline may be tagged as the ‘rat line’ or ‘snitch line’ — quite the opposite of what is intended or desired. A more neutral term such as ‘report line’ can be one step in the right direction. In addition, while whistleblower lines may be thought to be one-way and narrowly focused on receiving reports of potential wrongdoing, some companies have turned them into a two-way communication system called a ‘helpline’ or ‘guideline.’ In addition to taking reports, helplines provide guidance for employees who are concerned about a difficult ethical, legal, or regulatory issue that they or a co-worker may be facing. In this way, ethical issues that appear borderline or questionable can be resolved before a decision is made or action taken. So the helpline can be a way to prevent more wrongdoing. Whistleblowing and the new race to report 9
  12. 12. 9. When in Rome… Many of Rome’s streets are quite narrow. While some Another important aspect globally is the tactics and American SUVs can be seen on the streets, they seem strategies used in relation to communicating the large compared to the many small cars (and scooters) whistleblower system. Due to different cultures and that dominate. It is a lot harder to find space to park an work environments, it can be helpful for an organization SUV and while parked, their width can make them more to involve local personnel to help tailor communication vulnerable to damage from other vehicles that squeeze practices. The examples used in training materials and past. communications about whistleblowing may need to be tailored given the different audience and culture. In One size does not fit all. Vehicles in Rome are different addition, a strong emphasis may need to be placed on from those in New York because Rome is different certain items that would be violations of the organization’s from New York. In a similar way, taking an American code of ethics or code of conduct but which are whistleblower system and deploying it worldwide without considered perfectly acceptable culturally and within the any customization may not generate the desired results. law in some countries. In some countries, culture and history have made In certain countries, whistleblowing itself may not be a whistleblowing either a sensitive subject or taboo. problem, but expecting someone to make a report on a Certain countries have strict laws about the operation of telephone call speaking live with a hotline operator may whistleblower systems. These need to be factored into be unrealistic. Particularly in certain regions, such as Asia the design of a whistleblower system for organizations and Latin America, speaking to a stranger on the phone with international operations. For example, guidance and about a highly sensitive matter may be against the norm regulations within the European Union may influence the culturally. Providing alternative reporting methods such design of the whistleblower hotline for organizations that as e-mail or Web form may be much more attractive. have operations in those countries. Experience suggests that the workforce in certain countries such as India is typically most comfortable with e-mail and Internet communication and may be more inclined to report anonymously this way instead of by telephone hotline. Whistleblowing and the new race to report 10
  13. 13. 10. A prepared and diligent response Aside from some legal issues, about which lawyers can • Having a clear communication process — including advise, there is no one prescribed or ‘right approach’ to when senior executives (including the CEO) and the responding to whistleblower hotline allegations. However, audit committee are to be notified of an allegation. certain principles can help drive more effective strategies, Determine who needs to be informed about certain policies and tactics. Amongst these principles are: types of allegations for legal and regulatory compliance • Having a clear line of reporting from the hotline operator reasons and how the progress or results of investigations to a designated member of senior management such will be communicated (typically under the guidance of as a compliance and ethics officer, who should have legal counsel to help protect any legal privileges). Lastly, a reporting relationship directly with the board of what type of reporting should be provided to senior directors or audit committee. Allegations involving management, the board of directors, and the audit senior management or financial reporting should also committee, how frequently and in how much detail? be provided directly to the board of directors or audit committee. • Having pre-determined investigation protocols and plans of action to help drive timely and consistent responses • Having defined roles and responsibilities covering organization-wide. the team of individuals that will evaluate incoming reports and determine the action to be taken (such • Having a disciplinary committee with responsibility as the compliance officer, general counsel, internal for implementing appropriate discipline, based on audit director, or human resources director), who will investigatory findings, applied consistently organization- investigate each potential type of allegation (such wide. as human resources, internal audit, or investigative specialists) and where needed skills will be sourced (such as computer forensics, data analytics, and language skills). Whistleblowing and the new race to report 11
  14. 14. Deloitte Forensic Center The following material is available on the Deloitte Forensic Notable material in other publications: Center Web site www.deloitte.com/forensiccenter or from • Shop Talk: Compliance Risks in New Data Technologies, dfc@deloitte.com. Compliance Week, July 2010 • Many Companies Ill-Equipped to Handle Social Media Deloitte Forensic Center book: e-discovery, BoardMember.com, June 2010 • Corporate Resiliency: Managing the Growing Risk of • Many Companies Expect to Face Difficulties in Assessing Fraud and Corruption Financial Statement Fraud Risks, BNA Corporate –– Chapter 1 available for download Accountability Report, May 2010 • Who’s Allegedly ‘Cooking the Books’ and Where?, Deloitte Forensic Center Business Crimes Bulletin, January 2010 ForThoughts newsletters and videos: • Being Ready for the Worst, Fraud Magazine, November/ • Technology Fraud: The Lure of Private Companies December 2009 • E-discovery: Mitigating Risk Through Better • Mapping Your Fraud Risks, Harvard Business Review, Communication October 2009 • White-Collar Crime: Preparing for Enhanced Enforcement • Listen to Your Whistleblowers, Corporate Board Member, • The Cost of Fraud: Strategies for Managing a Growing Third Quarter, 2009 Expense • Use Heat Maps to Expose Rare but Dangerous Frauds, • Compliance and Integrity Risk: Getting M&A Pricing Right HBR NOW, June 2009 • Procurement Fraud and Corruption: Sourcing from Asia • Ten Things about Financial Statement Fraud — Third edition • The Expanded False Claims Act: FERA Creates New Risks • Avoiding Fraud: It’s Not Always Easy Being Green • Foreign Corrupt Practices Act (FCPA) Due Diligence in M&A • The Fraud Enforcement and Recovery Act “FERA” • Ten Things About Bankruptcy and Fraud • Applying Six Degrees of Separation to Preventing Fraud • India and the FCPA • Helping to Prevent University Fraud • Avoiding FCPA Risk While Doing Business in China • The Shifting Landscape of Health Care Fraud and Regulatory Compliance • Some of the Leading Practices in FCPA Compliance • Monitoring Hospital-Physician Contractual Arrangements to Comply with Changing Regulations • Managing Fraud Risk: Being Prepared • Ten Things about Fraud Control Whistleblowing and the new race to report 12
  15. 15. This article is published as part of ForThoughts, the Deloitte Forensic Center’s newsletter series, which is edited by TobyBishop, director of the Deloitte Forensic Center. ForThoughts highlights trends and issues in fraud, corruption, and othercomplex business issues. To subscribe to ForThoughts, visit www.deloitte.com/forenssiccenter or send an e-mail todfc@deloitte.com.AuthorsDonna Epps is a partner in the Forensic & Dispute Services practice of Deloitte Financial Advisory Services LLP, thenational leader of the Anti-fraud Consulting group and a member of the leadership team for the Governance and RiskManagement practice. Ms. Epps may be reached at depps@deloitte.com.Mohammed Ahmed is a senior manager in the Forensic & Dispute Services practice of Deloitte Financial Advisory ServicesLLP. Mr. Ahmed may be reached at mahmed@deloitte.com.Deloitte Forensic CenterThe Deloitte Forensic Center is a think tank aimed at exploring new approaches for mitigating the costs, risks and effectsof fraud, corruption, and other issues facing the global business community.The Center aims to advance the state of thinking in areas such as fraud and corruption by exploring issues from theperspective of forensic accountants, corporate leaders, and other professionals involved in forensic matters. The DeloitteForensic Center is sponsored by Deloitte Financial Advisory Services LLP. For more information, visit www.deloitte.com/forensiccenter.This publication contains general information only and is based on the experiences and research of Deloitte practitioners. Deloitte is not, by meansof this publication, rendering accounting, auditing, business, financial, investment, legal, or other professional advice or services. This publicationis not a substitute for such professional advice or services, nor should it be used as a basis for any decision or action that may affect your business.Before making any decision or taking any action that may affect your business, you should consult a qualified professional advisor.Deloitte, its affiliates, and related entities shall not be responsible for any loss sustained by any person who relies on this publication.About DeloitteDeloitte refers to one or more of Deloitte Touche Tohmatsu Limited, a UK private company limited by guarantee, and its network of member firms,each of which is a legally separate and independent entity. Please see www.deloitte.com/about for a detailed description of the legal structure ofDeloitte Touche Tohmatsu Limited and its member firms. Please see www.deloitte.com/us/about for a detailed description of the legal structure ofDeloitte LLP and its subsidiaries.Copyright © 2010 Deloitte Development LLC. All rights reserved.Member of Deloitte Touche Tohmatsu Limited