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Fighting internal fraud with anonymous whistleblower hotlines

As the ACFE’s Occupational Fraud 2024: A Report to the Nations shows, tips from employees are the most common method of fraud detection in organizations. But to encourage employees to report wrongdoing, they must feel safe doing so, and protecting their anonymity is essential to that end. Here, the author discusses how organizations can best implement anonymous fraud reporting hotlines that encourage people to report wrongdoing and help them detect frauds faster and recover more losses.

When the city of Hamilton in Ontario, Canada, first enacted its whistleblower bylaw in 2009, city leaders soon discovered that it wasn’t effectively uncovering wrongdoing in municipal government. The city council had originally passed the bylaw to encourage city employees and citizens alike to report instances of fraud and other abuses they’d witnessed, but in the years since it had gone into effect, few people were reporting anything. City leaders decided that they needed to shift their strategy to encourage whistleblowing and contacted my organization, an ethics reporting and case management provider, for help.

As we reviewed Hamilton’s whistleblower bylaw, we realized that it had an anti-retaliation policy without an anonymous-reporting tool to shield the identities of tipsters should they report wrongdoing — a best practice that can encourage people to come forward and report instances of fraud and abuse. (See “Creating a No-Tolerance Approach to Retaliation,” by Cherelle Johannes, Navex, Risk and Compliance Matters, 2022.) The new system that Hamilton decided to implement is a completely anonymous hotline with an anti-retaliation policy to encourage people to come forward and report fraud without fear. City employees and the public can access the new system 24 hours a day, seven days a week by email, telephone, mail and fax. The system is run by the city’s Office of the Auditor General.

It wasn’t long after Hamilton implemented its new whistleblower hotline in 2019 that the auditor’s office saw an influx of reports of various types of wrongdoing. Between January 1, 2019, and June 30, 2020, the city auditor received 99 complaints. Between July 1, 2020, and June 30, 2021, it received 80 reports. The city auditor received 107 tips from city staff and the public between July 2021 and June 2022, and between July 2022 and June 2023, the city had a total of 157 reports — it’s highest volume of reports ever received, according to the city’s 2023 Fraud, Waste, and Whistleblower Semi-Annual Update. (See “Audit reports to committees.”)

Tips to the hotline revealed instances of city employees playing golf with vendors during work hours, vendors buying drinks for city employees’ at an office holiday party, stolen equipment, and failures to disclose conflicts of interest. Because of these tips, the city fired employees, referred cases to the police, and investigated $1.1 million in actual and potential losses while recovering $33,000 in losses since 2019.

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