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Who Wants to Blow the Whistle on Insider Fraud?

According to the latest staff fraud report from the UK’s Fraud Prevention Service, and specifically the Credit Industry Fraud Avoidance System (CIFAS), only 3% of insider or staff fraud attacks were uncovered in 2012 using the formal “whistle blowing” process, where a colleague reports what they see or suspect.

So, while incidents of reported staff fraud increased year-on-year by 43%, and there was a 22% increase in the number of dishonest actions to gain a benefit by theft or deception, people have a low appetite to “inform” on the suspected or actual misdeeds of their colleagues. Is this because colleagues are too trusting, or because they are willing to turn a blind eye, or because there is a stigma attached to becoming a whistle blower or an informant?

A number of experts believe the latter to be the biggest barrier. Despite strong regulatory measures to promote openness and to compel those with suspicions to bring them forward without fear or favor, too many staff are still seeing the risk of being seen as a “snitch.” They worry that they will lose the trust of friends and coworkers, that they’ll be wrong about the misdoings, or that they will damage their career.
Is it possible that the very concept of a “whistle blower” acts as an obstacle too? I watched at the weekend as Crewe Alexandra played Southend United in the televised Johnstone Paint Trophy football final in the auspicious surroundings of Wembley stadium. Southend were the clear underdogs, coming from a lower division, and went on to lose 2-0. But most of the football pundits, with the benefit of the television playback, considered that Southend should have been awarded two penalty decisions, and also that Crewe’s second goal came from an infringement against a Southend player that was also not given. “Why do you think the referee did not give those decisions?” the commentator asked a panel of experts. “Probably because he was not 100% certain,” came the reply.

If a trained official won’t blow the whistle against superior players unless there is absolutely no doubt, then what chance does the industry have of a staff member blowing the whistle against someone they work with, based on suspicion but not 100% certainty?

Years ago I introduced a system called the “rumor box” when I was working within a financial services operation. Any staff member could insert a sheet of paper with their question, concern or assertion, knowing it was guaranteed to be reviewed and investigated.  When the staff member requested, and it was appropriate to be made public, they would also receive feedback on the result.

It was an ugly process, but incredibly accessible and effective. The anonymity it offered prompted some very important disclosures, not necessarily about fraud, but about people and processes, and this created a ready means of improvement. Perhaps there is some lesson there for today’s internal fraud disclosure process. After all, as the 3% figure shows, it takes a lot of guts to blow the whistle.

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