The battle against fraud: do reporting mechanisms work?

Dominic Peltier-Rivest

Journal of Financial Crime, 2018, vol. 25, issue 3, 784-794

Abstract: Purpose - This paper aims to explore how well reporting mechanisms work, investigate current trends and develop a framework for implementing effective mechanisms. Design/methodology/approach - This study is based on primary and secondary data, criminology theory and best corporate strategies. Findings - This study shows that the median number of annual reports equals 1.2 per cent of the number of employees in an organization and that 40 per cent of these reports have merit (Navex Global, 2014). In addition, 42.2 per cent of all frauds are detected through internal reports, whatever their form. Organizations with formal reporting mechanisms sustain fraud losses that are 40.5 per cent less than other organizations (ACFE, 2014). Moreover, employees are more willing to report theft, human resource and workplace issues than fraud and corruption, while 21 per cent of all whistleblowers have experienced some form of retaliation for reporting wrongdoing (Ethics Resource Center, 2014). Results from primary data show that the option to remain anonymous is offered only by 74 per cent of all reporting mechanisms. This paper argues that effective reporting mechanisms should actively encourage whistleblowing, that all credible allegations should be independently investigated and that whistleblowers should be offered the option to remain anonymous. The oversight and the daily administration of reporting mechanisms should be given to two different parties who are independent from management and who do not participate in incentive compensation plans (Lipman, 2012). Research limitations/implications - This paper extends previous research by reporting on current hotline trends and integrating various factors into a framework to implement effective reporting mechanisms. Originality/value - It is the first paper to investigate the effectiveness of reporting mechanisms and current policy trends.

Keywords: Ethics; Retaliation; Fraud; Whistleblowing; Hotline; Reporting mechanisms (search for similar items in EconPapers)
Date: 2018
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Persistent link: https://EconPapers.repec.org/RePEc:eme:jfcpps:jfc-05-2017-0048

DOI: 10.1108/JFC-05-2017-0048

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