Are Forensic Disclosure Services at the Crossroads?
In South Africa in 1999, when we pioneered outsourced whistle-blowing services, tip-off services, forensic disclosure services or whatever you want to call them, they were viewed by many senior executives as the great panacea that was going to wipe out crime, catch all the crooks and generally solve all their problems on the risk management front.
As these services have been progressively introduced throughout private and public organisations in South Africa incredible results have been achieved – some of which have become the stuff of legend. In fact, according to the results of all surveys and studies, these disclosure services are by far the most successful single intervention in the fight against white-collar crime.
This year, the Association of Certified Fraud Examiners (ACFE) Global Report to the Nations on Occupational Fraud and Abuse for 2014 once again found that, what they call, “Tips” were significantly the largest “Initial Detector of Occupational Frauds” at 42.2%. This has dropped slightly from 43.3% since 2012. The 2nd and 3rd interventions were “Management Review” at 16% and “Internal Audit” at 14.1%.
What is also extremely interesting is that when they look at the impact of “Hotlines” they find that “the presence of a reporting hotline had a substantial impact on the initial fraud detection method of the cases we analyzed. Tips were the most common detection method for organisations with and without hotlines but the benefit was much more pronounced in organizations with them”.
In the case of “Organizations with Hotlines” 51% of all cases were detected by “Tips” while only 33.3% were detected by “Tips” in “Organizations without Hotlines”.
What none of the surveys or studies cover is the relative cost-effectiveness of these interventions and, while we have already established that disclosure services are significantly the most effective, I believe that they are by far the most effective per Rand. On need merely compare what an organisation spends on security guards and internal audits compared to what they pay their disclosure service provider to prove that thesis.
When one bears in mind that the monthly subscription for most disclosure services is normally a fraction of the cost of one security guard and if we then compare the respective return, it is really a no-brainer!
Notwithstanding these statistics, there are still doubting Thomases who deny the considerable value that these services add. What needs to be said in this respect is:
• One should always ask why a specific decision-maker is so opposed to the introduction of a disclosure service in their organisation. Are they concerned that information may be reported which could put them in a negative light or worse, that their skullduggery may be exposed?
• Having a disclosure service is like having an intruder alarm or an electric fence. If they are not maintained or switched on they simply won’t work! A critical success factor for a disclosure service is that top management should constantly reinforce the existence of the service and ensure that a continuous and concerted awareness programme is in place.
• Another critical success factor is that subscribers need to investigate every allegation and take action without fear or favour. Each and every employee should be treated fairly and consistently. It is totally counter-productive to receive loads of excellent reports and then do nothing about them.
• Finally, apart from the fact that top management is legally bound (by the Protected Disclosures Act, 2000) to protect the identity of people who make disclosures, they should be seen to respect the spirit of the law and not unleash witch hunts to trace and victimise people and especially employees who report illegal and inappropriate behaviour.
So the bottom-line is that (if properly managed) anonymous forensic disclosure services are still (and will for some time be) the most cost-effective and successful intervention in the fight against white-collar crime and inappropriate behaviour in the workplace!