The key to the success of the hotline is that employees are reassured and have confirmation that they can come forward with reports without fear of retaliation, and, most importantly, that they have the right to remain anonymous. Both of these commitments are integral to the success of implementing this type of programme.
With the requirement of Good Corporate Governance, King I, II & III reports recommend implementing a facility to give potential whistle blowers the mechanism to report wrongdoing in the public or private sector. Such a mechanism forms a critical part of every Fraud Prevention Programme to protect the company and its shareholders. The South African Companies Act (2008) stipulates the requirement for companies to install a mechanism or process providing stakeholders with the means to confidentially report irregular activities within the company to senior management. The implementation of such a facility became a legal requirement when the new Act became law in May 2011 (section 159 – “Whistle Blowers”).
According to the ACFE Report to the Nations on Occupational Fraud and Abuse, 2014 Global Fraud Study,
“tips are consistently and by far the most common detection method. Over 40% of all cases were detected by a tip – more than twice the rate of any other detection method. Employees accounted for nearly half of all the tips that led to the discovery of fraud.”
“The vast majority of occupational fraudsters are first-time offenders; only 5% had been convicted of a fraud-related offense prior to committing the crimes in our study. Furthermore, 82% of fraudsters had never previously been punished or terminated by an employer for fraud-related conduct.”