Common Pitfalls While Establishing a Whistle-blowing Hotline
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1. Managements today, in their hunger for success and appreciation of shareholders equity tend to forget the core essence behind the words in their vision and mission statements, corporate social responsibilities, duties towards employees etc. A whistleblowing encourages honest culture, promotes transparency, establishes clear communication within and outside the organisation, and keeps the key individual from abusing their powers. 2. Whistle-blowing bolstered by the provisions of the Sarbanes-Oxley Act is not only become a tool seen by regulators when it comes to leaving penalties but is a core pillar of a compliance program. 3. Though Whistle-blowing has been seen for snitches and glory seekers, it has undoubtedly become a symbol and tool to promote integrity.
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Common Pitfalls While Establishing a Whistle-blowing Hotline
- 2. About Robin Singh Robin Singh has worked in the Big 5 accounting firms such as Deloitte and Protiviti. He carries a strong experience in Fraud Investigations, developing anti-fraud frameworks, setting up Ethics and compliance programs across jurisdictions such as India, Singapore, Middle East and Afghanistan. He has ideated forensic tools / solutions for his selected fortune, 500 clients. He is a keen writer on the subject of ethics and compliance and has published articles across electronic and physical media. He currently works for the Abu Dhabi government in the healthcare sector managing the activities of Ethics and Fraud Control Department across the region. Feel free to reach him on: Website: whitecollarinvestigator.com Linkedin: https://ae.linkedin.com/in/whitecollarinvestigator Twitter: @drobinsingh 07/10/2016 By Robin Singh, MSc.(Law), MIT, CFE, CFAP
- 3. Agenda • Background • Why do you require a whistle-blowing mechanism • Common pitfalls and solutions • Disadvantages • The impact 07/10/2016 By Robin Singh, MSc.(Law), MIT, CFE, CFAP
- 5. q Yes q No q Unsure Q1: Do you have a hotline / helpline/ reporting line in place? 07/10/2016 By Robin Singh, MSc.(Law), MIT, CFE, CFAP
- 7. Top 5 Compliance Trends in 2016 Common pitfalls while establishing a White-blowing hotline Whistle-blowing is one of the key challenges for Compliance officers for today. • USA: OSHA Draft guidelines for organizations for WBP • UK: FCA and PRA on protection • Canada: New guidelines Source: Compliance Trends Survey –A survey by Thompson Reuters Source: Compliance Trends Survey –A survey by Compliance Week 07/10/2016 By Robin Singh, MSc.(Law), MIT, CFE, CFAP
- 8. Whistle-blowing means…………….. Common pitfalls while establishing a White-blowing hotline “Blow whistle” to call attention to an act: • To raise concern about an illicit act or • To prevent continuation of a wrong, but • In good faith. http://summergames.ap.org/providencejournal/content/london-olympics- soccer-women-698 07/10/2016 By Robin Singh, MSc.(Law), MIT, CFE, CFAP
- 9. • Fraud How whistle-blowing hotline is evolving Common pitfalls while establishing a White-blowing hotline • Misconduct • Bad stuff • Fraud & Misconduct • Regulatory reporting • Mal practice • Any reporting in good faith • A vehicle for vindictive reporting REGULATION DRIVEN: A) REDUCE LOSSES B) IMPROVE LIMITED PROCESSES SELECTED EMPLOYEE DIVEN COMPANY DRIVEN: A) A CORE FACTOR IN ACHVING BUSINESS OBJECTIVES B) ONE STOP SHOP FOR DATA C) SOCIAL MEDIA DRIVEN D) MOBILE APPS 07/10/2016 By Robin Singh, MSc.(Law), MIT, CFE, CFAP
- 11. Q2: Format q Online / web based q Telephone q Email q All the above q I do not have a whistle-blowing mechanism 07/10/2016 By Robin Singh, MSc.(Law), MIT, CFE, CFAP
- 12. Why do you require a Whistle-blowing mechanism 07/10/2016 By Robin Singh, MSc.(Law), MIT, CFE, CFAP
- 13. Just a phone or something else? • Internally (to other people within the accused organization) • Cut companies losses • Scrutinize internal processes, recoveries • To set the right morale Internally • “Fraud does not exist.” • “It would never happen here. My staff is honest.” • “There was no fraud in past.” • “Our existing controls work well.” • “If fraud was taking place, our IA would find it.” Myths • Externally (to regulators, law enforcement agencies, to the media or to groups concerned with the issues). • Vendors / contractors voice Externally Common pitfalls while establishing a White-blowing hotline 07/10/2016 By Robin Singh, MSc.(Law), MIT, CFE, CFAP
- 14. This guy has hurt me so many times (personal / Vindictive) No Does this conflict with values & culture? Is this illegal? (country & local laws) Does this contradict with the policies? Report No Report Report No No Yes Yes Yes Could this impact if all employees did this? Could this adversely impact any company stakeholders? (customers, shareholders, employees, suppliers) No No No Report Yes Report Report Report Yes Yes Yes Average Reporter Smart Reporter Over Smart Training Report by incriminating others Would you feel concerned if this appeared as a newspaper headline? Yes Report Nothing to report No The thought process……………. 07/10/2016 By Robin Singh, MSc.(Law), MIT, CFE, CFAP
- 15. Investigator’s thought process begins… How do investigators think? 1. Is the situation of sufficient moral importance to justify investigation? 2. Do you have all the facts 3. Do you properly understand their significance? 4. Verify with internal channels to confirm certain facts? 5. What would the whistle-blower gain out of this? 6. What is my responsibility in view of my role within the organization? 7. What are the chances for success? Convert Trusting too much Not having enough evidence Using the wrong style Not waiting for the right opportunity Not building support Playing the opponent’s game Not knowing when to stop Common pitfalls while establishing a White-blowing hotline 07/10/2016 By Robin Singh, MSc.(Law), MIT, CFE, CFAP
- 17. Assuming it’s about the money Common pitfalls while establishing a White-blowing hotline • Whistle-blowers do not do it for money Reasons FOR Reporting Reasons for NOT Reporting Reason % Reason % Believed corrective action would be taken 79% Believed no correction action would be taken 59% Support of management 75% Feared retaliation 46% Support of co-workers 72% Feared no anonymity 39% Could report anonymously 63% Believed someone else would report 24% 2005 National Business Ethics Survey, Ethics Research Center 07/10/2016 By Robin Singh, MSc.(Law), MIT, CFE, CFAP
- 18. Not knowing the right fit Common pitfalls while establishing a White-blowing hotlineExternal Internal General Familiar with multiple organizational structures, cultures; Bench Marking exercise; Well trained Internal benchmark is possible; Savings Economies of scale May be cost effective in large companies Time Can receive calls “24/7” Working hours Independence Higher degree of independence and objectivity from management Fear of retaliation / anonymity being compromised is higher (Caller id, voice, etc.) Languages multiple languages Has a direct impact on cost 07/10/2016 Internal External General Better understanding of organizational policies; Know what is to be done and when Some or absent Actionable time Way lesser Need the client approval Growth of trust Trust can exponentially grow with actions from ethics and compliance officer Vendor employees may not under- stand an organization’s employees, Data Internal External By Robin Singh, MSc.(Law), MIT, CFE, CFAP
- 20. qInternal qExternal qI do not know / Unsure qNo Hotline Q3: Do you have a internal or external reporting helpline? 07/10/2016 By Robin Singh, MSc.(Law), MIT, CFE, CFAP
- 21. What's in the name - Shakespeare Common pitfalls while establishing a White-blowing hotline 07/10/2016 • Hotline: Negativity • A deal breaker? • Transition: Fraud and Misconduct Hotline à Whistle-blowing Hotlineà Reporting line • Bottom-line: What do employees perceive it as? • . . . . Just DON’T call it “hotline” By Robin Singh, MSc.(Law), MIT, CFE, CFAP
- 23. qEthics & Compliance qInternal Audit qLegal qI do not know / Unsure qNo Hotline Q4: Who owns the Reporting Hipline? 07/10/2016 By Robin Singh, MSc.(Law), MIT, CFE, CFAP
- 24. Who owns it? Common pitfalls while establishing a White-blowing hotline 07/10/2016 • Which function will have primary responsibility? ü Recommended: Ethics and Compliance • How will reports be handled? Who decides? • Who is informed of reports and when? By Robin Singh, MSc.(Law), MIT, CFE, CFAP
- 25. “I receive only a few calls in a year” – Compliance officer Common pitfalls while establishing a White-blowing hotline 07/10/2016 Hawaii • Double edge sword: Are few calls good? • What’s bad about it? • Is there anything good about it? By Robin Singh, MSc.(Law), MIT, CFE, CFAP
- 26. Communication – How and to whom (1/2) Common pitfalls while establishing a White-blowing hotline 07/10/2016 Means* % Poster 33% Employee 14% Intranet 11% Handbook 08% Wallet Card *2013 Corporate Governance and Compliance Hotline Benchmarking Report First Report Made to:* % Supervisor 56% Higher Management 26% Hotline/Helpline 5% Other Responsible Person incl. Ethics Officer 5% *2011 National Business Ethics Survey, Ethics Research Center By Robin Singh, MSc.(Law), MIT, CFE, CFAP
- 27. Communication – Languages & training (2/2) Common pitfalls while establishing a White-blowing hotline 07/10/2016 • Languages have always been a barrier to entry. • (15 minute pitch) Market the hotline at forums / task force meetings (e.g CEO, Nursing forum, Facilities forum, etc.) • Training ü Live, Online, Webinar, etc. • WB policy in other languages • Mobile App based marketing By Robin Singh, MSc.(Law), MIT, CFE, CFAP
- 28. whistleblower protection program (1/2) Common pitfalls while establishing a White-blowing hotline 07/10/2016 • Another reason which might discourage or encourage users to file a report • Perceived by Reporters who suffered said Misconduct • Employees must perceive that their issues and reports are welcome Type of Retaliation* % Excluded from decisions / work activity by management 64% Given cold shoulder by colleagues 62% Verbal abuse by supervisor or other management 62% Job threatened 56% Not given promotions or raises 55% *2011 National Business Ethics Survey, Ethics Research Center By Robin Singh, MSc.(Law), MIT, CFE, CFAP
- 29. whistleblower protection program (2/2) Common pitfalls while establishing a White-blowing hotline 07/10/2016 Solutions: • Strong Policy, • Set Live Examples: During training and on intranet (without Names) • Train, train and train • Multiple communication channel • Set-up compliance liaison • (15 Minutes) Discuss scenario at forums / task force meetings (e.g CEO, Nursing forum, Facilities forum, etc.) By Robin Singh, MSc.(Law), MIT, CFE, CFAP
- 31. qYes qNo qI do not know / Unsure qI do not have a policy Q5: Do you have a WB protection program 07/10/2016 By Robin Singh, MSc.(Law), MIT, CFE, CFAP qPart of whistle-blowing policy qSeparate from whistle-blowing policy qI do not know / Unsure qNo Policy Q5: Is your WB protection program separate or a part of WB Policy?
- 32. Should those answering the internal helpline be attorneys or Ethics and Compliance? Common pitfalls while establishing a White-blowing hotline 07/10/2016 It Depends: • Depends on your setup – Trade secrets / IP / Nuclear house (Sometimes Attorney client privilege helps) ü Are they the right fit? – No (everything is black and white) ü Objective: Only Law based • Ethics and Compliance officers like to work in the grey area • It’s a people’s person job By Robin Singh, MSc.(Law), MIT, CFE, CFAP
- 33. Lack of credibility towards anonymous callers (1/2) Common pitfalls while establishing a White-blowing hotline 07/10/2016 • One of the pillars / key to success for the Reporting ‘Mechanism’ • In a toxic environment, it helps • Right to privacy • Tone at the top, Ethics and Compliance officers responsibility not dilute the culture • Examples: (????)- Search By Robin Singh, MSc.(Law), MIT, CFE, CFAP
- 34. Lack of credibility towards anonymous callers (2/2) Common pitfalls while establishing a White-blowing hotline 07/10/2016 Solutions: • ….. Never dismiss the report based n anonymity... • Focus: the substance of the allegations • Warrant some additional scrutiny. • Setup multi disciplinary task force (Comprising of Compliance (Chair), Legal, IA, HR, Finance, Procurement, operations, etc.) http://abcnews.go.com/Business/biggest- whistleblower-rewards/story?id=17222028By Robin Singh, MSc.(Law), MIT, CFE, CFAP
- 35. Not being aware & prepared for data privacy issues Common pitfalls while establishing a White-blowing hotline 07/10/2016 By Robin Singh, MSc.(Law), MIT, CFE, CFAP • Encrypt Database • Should be more than 1 person receiving the report • Awareness of who all can access service provider’s database (is it being used for selling purposes?) • How is data migration / retention / deletion taking place ü During the contract ü at the end of the
- 36. Failing to act and / or preserve confidentiality of the initial report received 07/10/2016 By Robin Singh, MSc.(Law), MIT, CFE, CFAP Rating Financials Impact (USD) Business Impact (e.g. in HC it is Patients) Reputational Impact Impact through regulatory breaches Employees Involved Source External / Internal 5 > 10 Mil Adverse Events Long term systemic failures or bad publicity, etc. International Law / Civil C-Suite Regulator / Police 4 3 2 1 Receive Complaints Channel: WB, Email, etc. Assess Complaints (Data base / Case mgmt.) Level 1 : Analytics & C&FRR Level 2: Risk Mgmt. Function Level 3: Committee • Investigate: Yourself • Investigate: Distribute • Investigate: Decline …….. Close Loop / Update system / Action Plan / Report to committee Criteria for assessing complaints / allegations Priority Criteria High Priority > 75% of the Cumulative Score Medium Priority > 40 % & < 75% of the Cumulative Score Low Priority <40% of the Cumulative Score HML Criteria * Cumulative Maximum Score = 30
- 37. Not publishing penalties for intentionally providing false reports Common pitfalls while establishing a White-blowing hotline 07/10/2016 • No room for bad faith • Culture problem • Understand the difference between: Reporting employee knew to be untrue vs those that simply lack factual support Vs misinterpret others’ behavior / laws • What mechanism to use? Intranet • Employees should be attuned to certain “red flags” that could indicate a given report is knowingly false. By Robin Singh, MSc.(Law), MIT, CFE, CFAP
- 38. Are employees required to investigate? Common pitfalls while establishing a White-blowing hotline 07/10/2016 Employee Report Suspected Wrong doing? Element of good faith comes in Creates a culture of openness Objective: Reporting helpline Report Suspected Wrong doings? Element of concrete evidence comes in Employee= Investigator Clicking pictures / Invading into privacy Impacting work culture Lawsuit Whistle-blowing policyBy Robin Singh, MSc.(Law), MIT, CFE, CFAP
- 39. Good to have: Customizable Screens / App world Common pitfalls while establishing a White-blowing hotline 07/10/2016 By Robin Singh, MSc.(Law), MIT, CFE, CFAP • Lot of players in the market & Lot of solutions. • Remember: the target is not only fraud an misconduct but all types of reporting. • Everything is dynamic and changing by the second • WB mechanism should be adaptive in nature to adept the changing people, unique culture • Customizable questions is the way to go ü Pros: Adapts to organizational culture ü Cons: Old data, poor trend analysis, etc.
- 41. What all is impacted with adequate trainings Common pitfalls while establishing a White-blowing hotline • Diminishes Trust in the Workplace • Can Negatively Affect Your Career • Can Destroy the Company • Risk to Personal Safety • Credibility 07/10/2016 By Robin Singh, MSc.(Law), MIT, CFE, CFAP
- 43. Effects of Whistle-blowing Common pitfalls while establishing a White-blowing hotline 07/10/2016 By Robin Singh, MSc.(Law), MIT, CFE, CFAP • Forced to leave organization/demotion • ruined • Family, health, and/or life in jeopardy • Outrage and divisiveness of people directly or indirectly involved • Physical or psychological isolation • Organization experiences loss of money, restitution, productivity, and positive reputations. • Incarceration