Many major fraud and corruption cases begin with a whistleblower’s complaint or a confidential report, and many such cases cannot be proven without the cooperation of a confidential, inside witness. Measures to encourage and facilitate such reports are, therefore, quite important.
Effective whistleblower systems are particularly important today; it is estimated that almost a 100 trillion dollars will be needed for traditionally high-risk infrastructure projects by 2040, trillions of dollars a year more to combat climate change, which the World Bank claims present “unprecedented” risks of fraud with potentially “existential consequences,” and still more trillions for critical aid programs in the developing world. Well managed whistleblower systems will be essential to successfully address these risks.
THE BASICS OF AN EFFECTIVE WHISTLEBLOWER SYSTEM
The system should be professionally managed internally or outsourced to a reputable provider. If internal, the system should be staffed by experienced personnel, ideally skilled in interviewing and knowledge of fraud, and supported by adequate resources – not just a telephone number in the HR department, answered from 9-5. These requirements are intended not just to successfully handle complaints when received but to encourage whistleblowers to file them in the first place – many whistleblowers will assess the professionalism and reliability of the systems in deciding whether or not to complain.
The “hotlines”- email, phone or in person access – should be widely publicized and promoted through notices on contractor’s and agency websites, clauses in bidding and contract documents, and “fraud awareness” presentations to contractors and agency staff. These presentations, which typically last about 2 hours, emphasize the organization’s commitment to integrity, describe some of the major fraud risks it faces, preventative measures, and explain how to report suspected wrongdoing through hotlines or other means.
The systems should permit anonymous complaints; otherwise, many honest people will not report, and important complaints will be lost. If the legitimacy of a report is questioned, it can be evaluated by linking it to red flags or other evidence of the alleged offense. For example, if a whistleblower alleges that it lost a contract because a competitor paid a bribe, the investigator can test the allegations by looking for other indicators of corruption in the award, rather than just speculating on the accuracy of the report or motivation of the complainant. This process can be automated in digital fraud detection systems.
In fact, in practice, red flags often are much more useful to evaluate complaints than they are as direct indicators or evidence of potential fraud or corruption.
THE IMPORTANCE OF “PROFESSIONALISM” IN HANDLING A WHISTLEBLOWER COMPLAINT
It is well known that many if not most persons with knowledge of misconduct in an organization are reluctant to report for many reasons, most importantly the fear of retaliation and the expectation of futility, i.e., that no useful action will be taken or result achieved despite the risks taken by the whistleblower.
Many of those who do report often retain the above concerns and may withdraw or limit their cooperation if they do not trust the system or the investigator assigned to follow up. Experience has shown that their trust depends primarily on their assessment of the investigator’s “professionalism” – defined as his or her competence, dedication and integrity. The investigator might inadvertently lose this trust by an unreasonable delay in responding to the complaint, by a lack of preparation or even by unintentional signals of disinterest in the case or a lack of belief in the whistleblower’s claim.
This failure to “project professionalism” can have most unfortunate consequences, as illustrated by the following actual case example:
The Investigation Unit for a major development agency received a confidential report that an aide to the Chief Technology Officer (CTO) was alleging that the CTO was accepting bribes in exchange for IT contracts.
The unit’s manager sent two junior investigators with accounting backgrounds to interview the aide. Neither were experienced interviewers and neither took any steps to prepare for the interview. They promptly returned and announced that the report was false, that the aide had no knowledge of corruption by the CTO.
The unit’s manager then sent two more experienced interviewers to reinterview the aide. They first did some research on IT contract awards which tended to support the allegations of corruption involving the CTO
The aide then confirmed, confidentially, that the CTO was taking bribes and provided evidence that led to his eventual dismissal.
The aide said that he did not disclose this to the first team of investigators because they appeared to be unprepared, inexperienced and disinterested, that he did not trust that they would protect his anonymity, or accomplish anything if he disclosed the evidence, at great risk to himself and his career.
In summary, it is most important for the investigator to remember that, just as he or she is evaluating the credibility of the whistleblower, the whistleblower is evaluating the trustworthiness of the investigator, and act accordingly.
See How to Respond to a Complaint in the Guide to Combating Corruption and Fraud for more information on how to handle a whistleblower, including useful questions to ask.