Whistleblowing cases soar by 276 per cent since begining of financial crisis

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Whistleblowing cases reported to the Financial Services Authority have increased by 276 per cent in four years, according to information1 obtained under the Freedom of Information Act by HireRight’s sister company, Kroll Advisory Solutions, the global investigations firm.

Kroll found that between June 2011 and May 2012 the FSA received 3,733 contacts to its whistleblowing helpline. This is a 189 per cent increase on the 1,293 calls to the helpline in the same period three years earlier (June 2008-May 2009) and a 276 per cent increase on the 994 calls made in the same period four years earlier (June 2007-May 2008).

Kroll, which provides corporate investigations, says that over the last 12 months almost one in five (18 per cent) of its investigations were prompted by a whistleblower2. In 60 per cent of these investigations the original allegations were upheld, while 19 per cent stemmed from malicious allegations made intentionally to get revenge on an individual or company.

The firm says that the increase in whistleblowing is likely to stem from three key factors:

  • an increase in the level of financial crime within businesses, probably stemming from the growth of investments into developing overseas markets, which often have less stringent controls on criminal activity
  • the ease of creating electronic identities, which can make it easier for individuals to perpetrate fraud
  • the development in recent years of clearer and more established procedures for handling whistleblowing cases and protection for whistleblowers

Kroll is warning that businesses need to handle whistleblowing allegations with the utmost care to ensure that their responses are appropriate and the best outcomes are achieved.

Benedict Hamilton, a Managing Director at Kroll, said: “Whistleblowing cases are becoming much more common and they can be hugely significant for companies; we have investigated cases where losses of up to £1 billion have been reported by a whistleblower.

“As companies increasingly invest in often risky emerging markets and individuals see criminal opportunities made possible by the advancement of technology, we believe cases of whistleblowing will continue to rise. The increase in these cases is also being driven by the introduction of more stringent regulation and guidance governing whistleblowing procedures.

““It is crucial that companies respond very quickly and in an appropriate manner to a whistleblowing allegation to understand the facts behind it and ensure the best outcomes are achieved. Many companies find that using a third party investigator provides them with a level of reassurance that the right decisions have been made. This can help to limit financial and reputational damage, and where appropriate, recover or avoid losses.”

Kroll also requested information3 under the Freedom of Information Act from the Serious Fraud Office, which reported that it had received 350 phone calls to its confidential number in the quarter of 2012, and another 288 reports by email or post.

Kroll recommends the following dos and don’ts to businesses faced with a whistleblower incident:

DOs

  • Respond fast – the first 24 hours is critical. Form a senior response team and ensure that the incident is considered by staff who are independent of the management team whose conduct has been questioned. This is often why external consultants are useful.
  • Assess the situation and credibility and gravity of the alleged issues before launching a full investigation
  • Keep a lid on it! Discretion is essential to minimise damage
  • Identify and secure evidence
  • Consider office and information security
  • Prepare and activate communication plans (internal and external)

Dont’s

  • Tamper or contaminate potentially important evidence
  • Make announcements either internally or externally before knowing the full facts
  • Start interviewing people too early
  • Jump to conclusions and take action too early; remember many whistleblower allegations are incorrect

1 Information obtained by Kroll Advisory Solutions from the Financial Services Authority under the Freedom of Information Act
2 Kroll Advisory Solutions data
3 Information obtained by Kroll Advisory Solutions from the Serious Fraud Office under the Freedom of Information Act

 

About Kroll Advisory Solutions

Kroll Advisory Solutions, the global leader in risk mitigation and response, delivers a wide range of solutions that span investigations, due diligence, compliance, cyber security and physical security. Clients partner with Kroll Advisory Solutions for the highest-value intelligence and insight to drive the most confident decisions about protecting their companies, assets and people.

Kroll Advisory Solutions is recognized for its expertise, with 40 years of experience meeting the demands of dynamic businesses and their environments around the world. Headquartered in New York with offices in 29 cities across 17 countries, Kroll Advisory Solutions has a multidisciplinary team of 700 employees.

Kroll Advisory Solutions is an Altegrity company. Learn more at www.krolladvisory.com.


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