A whistleblower program can be an effective method for stopping fraudulent activities, although not many companies utilize such a program. Here are some steps to take in building an effective whistleblower program, and how they benefit businesses.
A Whistleblower Program Should Encourage Early Reporting
An effective whistleblowing program should include reporting financial fraud early and within the company. This lets executives handle issues as they arise and effectively limit the damage that results. The company may then investigate and fix issues before law enforcement or a regulatory agency is notified.
However, many whistleblowers hesitate to report information if they aren’t sure how to file a report. They believe they won’t be taken seriously, or fear negative consequences. Therefore, it’s important that a whistleblowing program within a company offer incentives for whistleblowers who help identify and resolve significant financial concerns within the organization. Greater transparency will be attained, making the business more attractive to employees, clients and investors.
Create a Robust Reporting System
The reporting system should be secure, confidential, easily accessible, user-friendly and tailored to the organization’s needs. For example, a small business may implement a dedicated email account and telephone number that the compliance team monitors. A large company may utilize a hotline monitored by a third party that has the technology for effective telephone, email, and internet reporting systems. Reports must be quickly responded to, so that additional investigation may be performed and the matter resolved as quickly as possible.
Know Legal Requirements
Clarify the reporting relationship among departments, especially legal, audit and compliance, and create and utilize easily followed investigation steps for when suspicious activities are reported. The company then has a consistent foundation of strategically managing risks rather than avoiding them. For example, if an internal auditor uncovers a potentially fraudulent financial concern and reports it to the audit committee rather than the legal department, a discoverable record is created, attorney-client privilege doesn’t apply, and the company may be vulnerable to legal action. In addition, be aware of which types of reports law enforcement must be notified of, and follow through on all reporting requirements.
Continually Educate Employees
Because most workers will view a reporting hotline as a method of closely monitoring their activities, it’s important the company assigns employees to promote the hotline’s value. A meeting may be held to detail the hotline’s benefits in preventing fraud and continuing company operations. Maintaining operations helps workers stay employed and maintain or increase their income and standard of living. Employees should be reminded of the hotline’s use on an ongoing basis through emails, agenda items during meetings, newsletters and more at least quarterly.
Employers and employees must know that it’s illegal to retaliate against whistleblowers. Failure to comply with anti-retaliation laws may result in large penalties and adverse consequences. In addition, retaliation against whistleblowers undermines the company’s objective of maintaining an effective reporting system.
Creating and maintaining an effective whistleblower program helps companies remain transparent and compliant. For additional help with financial compliance concerns, reach out to the friendly staff at CarterWill Search & Flex today!