The Occupational Safety and Health Administration (OSHA) drafted a document intended to help employers develop a program to protect employees from retaliation. In it, OSHA suggested five key steps: (1) ensure leadership commitment, (2) foster an anti-retaliation culture, (3) implement a system for responding to reports of retaliation, (4) conduct anti-retaliation training, and (5) monitor progress and program improvement.
Retaliation against reporters of misconduct is high globally, according to the Ethics & Compliance Initiative (ECI)’s Global Business Ethics Survey. ECI notes that in 11 of 13 countries surveyed, “at least one in three reporters across all sectors experienced retaliation.”
According to a 2016 PwC report on economic crime, 89 percent of more than 6,000 executives stated that their organizations have a formal business ethics and compliance program. However, many companies exhibit a degree of confusion about who has ownership over what. Responsibility for these programs is widely dispersed among roles in the surveyed organizations. The report urges readers to “know who has ownership—it’s half the battle.”
Applied correctly, data analytics can be of great to help compliance officers and chief audit executives. Writing for the FCPA Report, Bill Olsen, Dan Reynolds and Alex Koltsov of Grant Thornton LLP suggest compliance professionals use the information about schemes highlighted in Department of Justice and Securities and Exchange Commission settlement papers to identify potential compliance red flags and to help improve their monitoring systems. The report details three risk areas, cited in recent enforcement actions, that are primed for data analytics: product discounts; commissions; and meals, gifts, travel, and entertainment.
The Securities and Exchange Commission (SEC)’s whistleblower program has grown substantially. Since its inception, the whistleblower program has received tips from concerned individuals in all 50 states, as well as from people living in 95 countries outside of the United States. In 2015, the SEC received around 4,000 tips, leading to some of the largest payouts in the short history of the Office of the Whistleblower. For more information, read the SEC’s 2015 report to Congress on the whistleblower program.
The leading indicator of misconduct is pressure to compromise standards, according to the Ethics & Compliance Initiative’s Global Business Ethics Survey. The 2016 report, available for download free of charge, is a comprehensive analysis of over 13,000 responses on global indicators of fraud. What’s more, nearly three-quarters of employees who felt pressure also said they witnessed misconduct. In the absence of this pressure? Only 17 percent said they observed misconduct in their place of business.
Data is a robust asset that can aid in the detection and deterrence of fraud. Last year, the Anti-Fraud Collaboration convened a panel of experts to discuss how data analytics can help companies identify red flags that indicate potential fraudulent manipulations. This webinar also provides advice on how companies can move from ad hoc analyses to more proactive continuous detection through the application of advanced tools. Watch the program to learn more.
Advances in computing power and analytical software are uncovering new ways to identify fraud. In the past, analytical procedures like Benford’s Law have helped uncover fraud schemes in ledger and journal entry data. However, if you stick strictly to numbers, you could be missing out. A vast majority of organizational data are unstructured text. Fraud magazine has a two-part article that details the use of a methodology that analyses the frequency of letters to help uncover potential fraudulent activity.
The fraud triangle has been a fixture in discussions on financial reporting fraud for over 50 years. Don Cressey first developed the fraud triangle in a 1953 paper in which he described the conditions that may exist in a strong or weak economy that lead to fraud. The conditions he outlines include: pressure or incentive to engage in fraud, a perceived opportunity, and the ability to rationalize fraudulent behavior. For a more detailed description of the ‘fraud triangle’ and the conditions that lead to fraud, check out the Anti-Fraud Collaboration’s report The Fraud Resistant Organization, which includes a bibliography of useful reports and resources.
Nearly three hundred professionals with insight into their organizations’ fraud risk management responded to a survey conducted by Protiviti and Utica College in late 2015. The survey focused on six key areas: fraud risk governance, fraud risk assessment, fraud prevention techniques, fraud detection techniques, corruption and reporting, and investigation and corrective action. Among other findings, the survey report, Taking the Best Route to Managing Fraud and Corruption Risk, states that organizations without strong fraud detection and reporting programs face a higher risk of “whistleblower” disclosures. “The lack of a strong fraud detection and prevention culture,” it says, “can create a vacuum in which some individuals may feel compelled, either morally or for the financial remuneration of a whistleblower ‘bounty,’ to report fraud directly to regulators instead of trusting that their concerns will be fully and fairly investigated internally.”