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Fight graft by making whistleblowing easier

Singapore celebrates its Golden Jubilee this year. The cornerstone of the country’s economic success is its unwavering commitment to maintaining a transparent and pro-business environment with zero tolerance for corruption both in the public and private sectors. However, several high-profile graft convictions in the past couple of years have, to some extent, provided a wake-up call. There is clearly no room for complacency.

A recent speech by Singapore’s Prime Minister Lee Hsien Loong sends a strong signal on the Government’s anti-graft commitment. 
Photo: Thinkstock

A recent speech by Singapore’s Prime Minister Lee Hsien Loong sends a strong signal on the Government’s anti-graft commitment.
Photo: Thinkstock

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Singapore celebrates its Golden Jubilee this year. The cornerstone of the country’s economic success is its unwavering commitment to maintaining a transparent and pro-business environment with zero tolerance for corruption both in the public and private sectors. However, several high-profile graft convictions in the past couple of years have, to some extent, provided a wake-up call. There is clearly no room for complacency.

A recent speech by Singapore’s Prime Minister Lee Hsien Loong sends a strong signal on the Government’s anti-graft commitment. He announced several moves to curb corruption, including reviewing the Prevention of Corruption Act; strengthening the Corrupt Practices Investigation Bureau (CPIB) with a more than 20 per cent increase of its manpower; and setting up a central corruption reporting centre for the public to lodge complaints more discreetly and easily.

The last measure is particularly interesting in that it encourages public participation in the nation’s defence against corruption through whistleblowing.

Whistleblowing is an important channel that enables fraud detection. The Association of Certified Fraud Examiners (ACFE) 2014 report said tips are consistently and, by far, the most common detection method and employees accounted for nearly half of all tips that led to the discovery of fraud.

However, in EY’s global fraud survey published last year, 45 per cent of the global respondents do not have a whistleblowing hotline.

A TWO-WAY COMMITMENT

Ensuring the availability of a whistleblowing channel is only half the battle won. The effectiveness of whistleblowing depends on both the whistleblower and the recipient organisation. In our experience, whistleblowing sometimes fails to achieve its intended objective. One of the reasons is that the quality of whistleblower complaints can be patchy and these complaints generally fall into two broad categories.

The first category of complaints comprises those that contain opinions, but lack the substance and details that are needed for meaningful investigation. Examples of these complaints range from the incoherent to petty grievances, such as tip-offs on employees who are taking extended tea breaks.

The second category comprises complaints that include a high level of specific details including date, time, persons of interest and, increasingly, photographic evidence and, therefore, seem more authentic and investigation-worthy.

Distinguishing spurious claims and bona fide allegations can often be challenging. Organisations have finite resources and it is impractical to investigate every complaint. As a result, some instances of fraud may not be uncovered because of the lack of thought that went into the complaint. It is, therefore, important to educate individuals on what makes an effective whistleblowing complaint.

On the other hand, organisations have a responsibility to build a credible anti-fraud programme that motivates and enables whistleblowers to come forth. Often, the lack of the above inadvertently results in inertia or self-censorship on the part of individuals.

First, there must be clear policies and channels for whistleblowing that should be clearly communicated and made available to all employees and possibly even third-parties. It is necessary to establish an incident reporting matrix, describing the parties who will be privy to the complaint. There must be an alternative reporting channel if the people handling whistleblower complaints are the very targets of the complaint.

From the whistleblower’s perspective, anonymity, clearly defined response time and proper closure are important. A lack of regard for these factors can diminish whistleblower confidence.

In a particular case reported in the media, an organisation was sued by a whistleblower for causing him to be a subject of incessant harassment, as a result of his name, address and contact details being revealed in an open court document. An anti-fraud programme must specify adequate protection of the whistleblower’s identity and take steps to ensure that such information is not compromised at any stage of the investigation.

Organisations must also clearly communicate their response time. Whistleblowers are anxious for actions and may be disheartened if the organisation is perceived as non-responsive. Moreover, the days immediately succeeding an event are often critical in any forensic investigation. Having a clearly defined response time increases the likelihood of preserving evidence.

Providing proper closure by updating the whistleblower on the results of investigation should be a standard procedure. The outcome could be that the allegation has been looked into and appropriate actions taken, or that there is insufficient evidence for further action.

Finally, it pays to consider incentivising whistleblowers. In the United States, an anonymous tipster had received US$30 million (S$41.1 million) from the Securities and Exchange Commission as part of a programme that incentivises insiders to report wrongdoing. While Singapore regulators do not reward whistleblowers, some organisations recognise that the outlay to improve chances of early detection — monetary reward included — is often small in view of the larger costs of fraud. Indeed, organisations are sitting up to the risks of corruption — both by employees and third parties that they deal with. There are increasing demands for anti-fraud services in Singapore and the region: The strength of the country’s fraud investigation and dispute services team has tripled over the past four years and is set to double in the next two years.

As fraud perpetrators get smarter and more sophisticated in their wrongdoings, so must anti-fraud programmes and investigation tools. Technology and data analytics will have a major role to play in combating fraud, yet organisations are missing out on opportunities to maximise the potential.

ABOUT THE AUTHORS:

Lawrance Lai and Jack Wong are Partner and Director for Fraud Investigation and Dispute Services at EY respectively. The views reflected in this commentary are their own.

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