Whistleblowers Discover More Fraud than Internal or External Audits

Fraud within companies is on the rise and whistleblowers are playing a crucial role in helping detect it, according to the eighth annual Global Fraud Report produced by Kroll and released in late November.

Three quarters (75%) of companies responding to the survey suffered a “fraud incident” within the past year. While we define fraud in the context of our work here at a whistleblower law firm more narrowly than they do, the data does cover some of the areas where we work, such as regulatory or compliance breaches (12% of companies over the last 12 months) and corruption & bribery (11%).

The “company’s strongest defense” against these types of incidents has been other employees, who were “at least partially responsible for exposing 41% of cases.” We have of course known this all along, but we appreciate the fact that the data is supporting it. According to the report, “[e]mployee-discovered and reported fraud is well ahead of the next two sources of discovery, external (31%) or internal (25%) audits.”

Hopefully, businesses will start to learn from this data and recognize that whistleblowers are not their enemy but can assist them in their compliance efforts. According to the research, 28% of respondents intend to invest in new or additional whistleblowing programs and anti-fraud staff training in the next 12 months.

The data in the report also suggests that there are fewer whistleblowers where retaliation protections are weak. In the Gulf Region where no country has overarching legislation to provide comfort to whistleblowers regarding their treatment by employers, only 20% of fraud was discovered through the efforts of whistleblowers. In the Americas, more than 50% of fraud reporting to companies comes from whistleblowers.

It is encouraging to see such numbers. Businesses have put large amounts of money into compliance programs over the past few years. But what they need to do more of is treat their ethically employees well and take their complaints seriously. Their employees will always be the first line of defense in stopping violations of the law.

We know that when whistleblowers aren’t treated well internally or the violation of the law continues, they then turn externally to the government and/or the media. And some of them contact whistleblower attorneys like us to represent them throughout the process. Perhaps one day we will be out of a job because the internal compliance processes at corporations will work and individuals will never need our legal services. But we do not anticipate that happening anytime soon.

If you are one of the employees who has been sidelined or retaliated against after reporting fraud within your company, contact our whistleblower lawyers by calling 1-800-590-4116 or fill out our contact form.

The Kroll report can be downloaded from here.