Anonymous, third party anti-fraud hotlines

Most frauds are uncovered thanks to tips, not audits or management review. 

More than 39% of occupational frauds are detected thanks to tips, according to the Association of Certified Fraud Examiners. That’s more than twice as many as are detected by internal audits and management reviews combined.

It makes sense when you think about it. Employees are on the front line. They are often in close contact with each other for eight hours a day. They’re more apt to see the real nature of their peers since behaviors are likely to change when an owner or manager is on the scene. It’s a fraudster’s coworkers who are most likely to first notice or get wind of fraud in the workplace. Honest, loyal employees are often as upset by occupational fraud as owners…sometimes more. Fraud endangers the health of their income.

However revealing suspicions about a coworker is a tough thing to do. The honest employee may be angry with the suspected fraudster, but they are likely conflicted about being a informer. They will worry about not being believed, about being wrong, and about possible retribution. 

The answer is to provide an anonymous hotline manned by a third party.

The hotline should be introduced as an element in the company’s fraud policy. Frame it as a substitute for the usual big brother security programs. Explain that it shouldn’t be a forum for backstabbing or complaints, but stress that if they “see something they should say something.” Make it clear that the hotline will be reviewed by a third party who will keep the tip anonymous and will investigate the claim. Explain that all tips will be investigated but only those that are found to have substance will be acted on.

The “hotline” should not be a telephone operator or answering machine. An online questionnaire can be more effective. It provides an added level of anonymity, 24 hour coverage, and can require the level of information that makes an investigation possible. 

Tips that are just back stabbing or complaints about coworkers can actually be useful management tools. They bring to light staff problems that an owner many not otherwise know about until the situation gets even worse.