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Whistleblowers: what are the motivators?

Monday 9 April 2018


This article was originally published in the
GRC Professional: Financial Crime 2018 Edition.  Click here to download a PDF version of this story.

by Andrew McLeish
 

When the first whistleblower legislation was introduced in 2001 – The Whistleblower Protection Act 2001 (Vic), the aim of the Act was to afford a person the ultimate protection against reprisal by giving that person anonymity.  However there were limitations to the Act.  In early 2013 this legislation was updated with the introduction of the Protected Disclosure Act 2012 (Vic).  The new legislation broadened the scope of original Act and probably one of the significant changes were to the management of disclosures.  This meant that public bodies now had to have a frame work for reportable offences under that Act which included fraud and misconduct – that meant more accountability.
 
Between 2001 and 2012 the growth in the awareness of fraud and corruption in the public and private sector was rising rapidly.  In 2016, The Association of Certified Fraud Examiners (ACFE) published its annual report named, “Report to the Nations on occupational fraud and abuse. 2016 Global fraud survey” (
www.acfe.com) which surveyed companies from all over the world to identify the cost of fraud.  The ACFE also identified several key areas where fraud was identified and that included whistleblowing.
 
The ACFE survey results identified that, “In cases detected by tip at organizations with formal fraud reporting mechanisms, telephone hotlines were the most commonly used method (39.5%). However, tips submitted via email (34.1%) and web-based or online form (23.5%) combined to make reporting more common through the Internet than by telephone.”  So with this statement made it is not surprising that many public and private organisations including not for profit businesses are starting to implement formal reporting processes – an integrity line or whistleblower hotline.
 
Stopline has been collecting data about reporting through its whistleblower hotline service and we have identified that the growth in reporting of fraud in business has increased in the past 5 years.  This is not surprising as the number of clients using the independent and confidential service has also increased steadily over the same period.
 
So what are the motivators for reporting fraud in the work place?  I believe the real motivator is the individual and their beliefs.  The cultural shift for reporting misconduct is evident with the number of reports being published in the news recently.  In the past it was commonly referred to as “dobbing” or telling on someone, but nowadays people
 
There are many examples of individuals who report work place incidents or misconduct not for the recognition but because they are fed up with others doing the wrong thing.  Having said that, many people don’t come forward because they fear reprisal from their employers and also from their colleagues.
 
For example; company A is a small to medium sized business with over 30 employees.  As with all businesses employees come and go and the management of employee information is left to someone with a considerable amount of trust and in this instance the payroll officer.  This person has been with the company for many years and is considered part of the furniture. They work hard and ensure that payroll is managed perfectly – but is it?  You can probably see where this going, and the ACFE have some great information about identifying a fraudster and their common traits (
www.acfe.com).  One afternoon on the eve of submitting the payroll for approval by the CEO, the payroll officer was called to an urgent matter and she needed to leave in a hurry.  The payroll was completed and the electronic file sent to the CEO for approval as was the procedure.  Once approved the CEO lodges the payroll with the Bank for payment.
 
At about 4:30PM in the afternoon, the CEO received a message informing him that the payroll had not cleared because of an error.  The payroll officer was out of the office so he proceeded to check the electronic file to identify the error, and to his surprise there were two payments made to the same account but in different names.  One of the names was the payroll officer.  After some investigation the second name (with the same account number as the payroll officer) was a person that hadn’t been with the company for over 12 months.  At around 5PM that day the CEO called the payroll officer and asked her to return to work as there was an error, which she did.  When she arrived at work she was confronted by the CEO about the phantom employee and the payments made to her bank account.  She walked out of his office.
 
When Stopline was engaged to investigate the matter, we identified that for a period of 3 months, the payroll officer was paying herself twice and using a former employees name to hide that fact that there were two identical account numbers in the electronic file.  When we interviewed other staff members about their knowledge of the fraud, one employee stated that they knew about the double payments because the electronic file had failed once before and they had to correct it.  That person stated that they were afraid to report the matter because they didn’t know where to go and they were afraid of the payroll officer.  The total fraud was calculated at approximately $20,000. 
 
After doing some research for this article I found this; “In a recent study conducted by the Transnational Research Institute on Corruption at the Australian National University (which was commissioned by IBAC) found that the general public in Victoria have a strong feeling that corruption is increasing, but approximately half of the general public do not know where to report corruption. (A Graycar (September 2013), Perceptions of corruption in Victoria, IBAC, Victoria and www.liv.asn.au).”
 
We have so many more examples of people not knowing where or how to report workplace misconduct and we also have many examples of people not reporting matters through fear of reprisal. 
 
So how do we change people’s perception of reporting workplace misconduct?  How do we protect the whistleblower?  The latest legislation “Treasury Laws Amendment (Whistleblowers) Bill 2017”, which is currently before the Senate have proposed significant changes in the protection of whistleblowers and the reporting of misconduct.  The most significant move with the new proposed legislation will be to cover the private sector and ensure consistency by bringing all private sector legislation into a single Act.
 
This new legislation has been tabled for release on or about the 1 March 2018 and the complete list of recommendations have not been confirmed at the time of writing this article.  Having said that here is a list of some of the recommendations put forward by companies and individuals including Stopline:


  1. Broaden the private sector definition of disclosable conduct to a breach of any Commonwealth, state or territory law.
  2. Provide protections for both former and current staff that could make a disclosure, or are suspected of making a disclosure. 
  3. Provide appropriate protection for recipients of disclosure and those required to take action in relation to disclosures.
  4. Adopt a tiered approach comprising:
    (i) internal disclosure;
    (ii) regulatory disclosure; and
    (iii) external disclosure (in appropriate circumstances).
  5. Protect internal disclosure in the private sector, including in registered organisations.
  6. Align thresholds for protection across the public and private sectors.
  7. Allow for anonymous disclosure across the public and private sectors.
  8. Protect the confidentiality of the disclosures and the whistleblower’s identity.
  9. An appropriate body to set and promote standards for internal disclosure procedures in the private sector.
  10. Align the public and private sector with the protections, remedies and sanctions for reprisals in the Fair Work Registered Organisations Act 2009.
 
 

Biography
Andrew McLeish is the Managing Director of Stopline. More information about this new legislation can be found at www.stopline.com.au.