When designing FraudCracker, a ground-breaking online fraud reporting solution for companies, our founder Dr Gavin Symanowitz identified not only the main problems with existing solutions, but also the critical success factors that an effective fraud reporting mechanism should cover. In this article, he discusses the first of these factors.
If Bimla Chand could have it over again, she certainly would have made different decisions. In 2002, she was a revenue protection officer at RailCorp in Australia. After becoming aware of serial time-sheet fraud – a so-called ‘job-and-knock’ scam – she felt compelled to come forward with the information.
But instead of getting a pat on the back for doing the right thing, the opposite happened. From that day onwards, she was systematically victimised and bullied by her colleagues, to the point where she was eventually declared mentally insane. She was ultimately dismissed, effectively ruining her career. Bimla later said: “State Rail not only wants to bury me, they want to dance on my grave for daring to speak out.” She cautioned other potential whistle-blowers not to follow her example, because “blowing the whistle has ruined my life”.
The problem is that most employees have heard similar stories to that of Bimla. So they are very reluctant to come forward with information about fraudulent or unethical activity that they’ve witnessed. It’s just too risky. So most employees simply keep quiet, and the important information never gets reported. In fact, in an independent survey, 54% of employees stated that the fear of retribution from co-workers was the main reason for their silence.
When I started designing the optimal fraud reporting mechanism for FraudCracker, the need for anonymity was clearly identified as the most critical factor for success. Quite simply, an employee needs to feel completely safe before he or she will be comfortable coming forward with crucial information about wrongdoing in the company.
The problem is that most existing solutions fail miserably in this regard. While purveyors of anti-fraud telephone hotlines say that the caller’s identity remains hidden, employees believe that this isn’t completely true. They know that their voices are recorded and so if management really wanted to discover the identity of the whistle-blower, then they could. The fact that management is very unlikely to do such a thing is actually irrelevant – it’s perceptions that matter. The unfortunate perception is that the employee’s anonymity is at the discretion of management, and this deters many potential whistle-blowers from using the hotline.
The core of an effective fraud reporting mechanism has to be built around satisfying the need for anonymity as the number one priority. If there is any room for doubt in the mind of an employee, then the result will be losses which the company will never know about. The stakes are too high to get it wrong.