Hotline – A tool for fraud detection | KPMG | NA

Hotline – A tool for fraud detection

Hotline – A tool for fraud detection

"If you do not speak up when it matters, when would it matter that you speak? The opposite of courage is conformity. Even a dead fish can go with the flow." – Jim Hightower

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Senior Manager (Forensics)

KPMG in Namibia

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Hotlines are management tools designed to enable concerned employees as well as third parties to report suspicions of fraud, misconduct or unethical behaviour in a confidential manner. The fraud hotline continues to be the most effective tool that companies and organisations can utilise to detect and combat fraud. Tips are the most common means of detecting organisational fraud and abuse. As per the 2014 Association of Certified Fraud Examiners (ACFE) Report to the Nations – where a hotline was in place, organisations experienced frauds that were 41% less costly, and they detected frauds 50% more quickly.

 

The fact that the latest KPMG Forensic survey, entitled “Global profiles of the fraudster” identified anonymous informal tips (22%) and formal whistle blowing (19%) as the primary fraud detection method in uncovering corruption, further validates the importance of having a properly managed Hotline in place.

 

The King III report, which is a ground-breaking code of corporate governance in South Africa issued by the King Committee on Corporate Governance, recommends that – arrangements must be made to enable employees and external whistle-blowers to report possible improprieties (including fraud) in confidence. Like the radar systems used by the military, the hotline is an early warning system to defuse possible risks to the organisation. However, hotline still features low as a tool in terms of priority of organisations as evident in the results of the 2013 Namibia National Survey conducted by the Anti-Corruption Commission (ACC), as per which – only 44% of the medium sized enterprises had a whistleblower programme in place.

 

The hotline MUST support anonymity of the whistle-blower. No one wants to be penalised or victimised for doing the right thing. The hotline as a tool has failed in the absence of anonymity and the offer of protection to the whistle-blower. As per the results of the 2013 Namibia National Survey, conducted by the ACC – the protection of whistle-blowers features low (less than 30%) in terms of risk management disciplinary procedures adopted by enterprises. In Namibia the protection of the whistle-blower is still a big question. Unlike in South Africa, which has the Protected Disclosures Act, Namibia does not have a dedicated whistle-blower related Act. The Anti-Corruption Act, the Financial Intelligence Act and the Prevention of Organised Crime Act cover some aspects related to the protection for informers (whistle-blowers), however these are limited in scope and do not offer the comfort and security that is required for a whistle-blower to speak out about observed injustices.

 

With the growing number of fraud and misconduct cases that feature in local media, it has never been more crucial for organisations in Namibia to adopt and implement a fraud hotline with the key features of anonymity and accessibility. The success of this service can be attributed to the anonymity maintained throughout the process, including at the time of situational reporting to management, which safeguards the whistleblower. Such a mechanism would no doubt inspire greater corporate ethics and echo a top management tone of “zero tolerance” toward fraud and other unethical behaviour within the workplace.

 

“A good head and a good heart are always a formidable combination.” – Nelson Mandela

© 2017 KPMG Advisory Services (Namibia) (Pty) Ltd, a Namibian company and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.

The information contained in this newsletter is of a general nature and should not be used or relied upon as a substitute for detailed advice or as a basis for formulating business decisions. Please contact the writer for advice relating to your specific circumstances. Although we endeavor to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act on such information without appropriate professional advice after a thorough examination of the particular situation.

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