By Douglas Cash, MBA, CFE, CFI, CFCI
I have worked in the fraud detection and investigation arena for over 20 years and there is one aspect of fraud that still amazes me: no one wants to be thought of as a “rat.” All too often, someone in the organization had an idea of wrongdoing, but didn’t know of a way to report it anonymously and/or confidentially until the last possible moment. The dilemma of being thought of as a “rat” versus not wanting to work with untruthful people often weighs heavily. In many cases, the potential “whistleblower” might prefer to resign from their position rather than report a work place issue.
If the employee does choose to resign, the organization loses twice over. First, the organization loses an honest employee and secondly, still retains the dishonest employee. This may result in a large amount of money being taken without authorization and cause a significant negative impact on the organization.
When was the last time you read a news story about embezzlement or employee theft where people were interviewed and said, “No one ever trusted that person, we all thought they were a crook?” Probably never. The comments are more in line with “That person was the most trusted and liked employee we had, the last person anyone would suspect of stealing.”
Depending on the size of the organization, the amount of money taken can have very different repercussions. For instance, $5,000 to $10,000 might not be an issue for a larger organization to lose; however, that same $5,000 to $10,000 might be a significant portion of a smaller organization’s budget and the loss would be devastating. According to the Association of Certified Fraud Examiners’ 2012 Report to the Nation, “Seventy-five percent of all businesses are affected by fraud on a yearly average and the average business loses five percent of its annual revenue.” With that information in mind, all businesses and organizations need to use as many fraud prevention and/or detection methodologies as they can.
Two of the easiest methodologies to implement are a toll-free confidential hotline for employees to report suspicious activity anonymously and a “whistleblower” policy. A detailed “whistleblower” policy spells out what type of activity is not authorized, what actions could be taken against the person(s) found violating the policy, and then holding all employees responsible to the same set of rules, no matter their position or tenure.
Prevention is easier and less expensive than detection. If you add in the potential costs of prosecution, either civil or criminal, as well as potentially never seeing your missing money again, it becomes clear that prevention is the best course of action for any organization to follow.
Take action; set up a “whistleblower” policy, start a confidential hotline, hold people accountable for their actions, and watch your organization flourish.
Doug Cash is an Eide Bailly Forensic Accounting Manager. He has more than 27 years of law enforcement experience, with an emphasis on white collar crime. He conducts fraud-related investigations, which include embezzlement, money laundering, identity theft and theft by misrepresentation. Doug has completed courses in the Reid, Cognitive and Kinesic disciplines of interviewing and teaches classes on identifying deception in individuals.