Blow your whistle to scare away fraudsters - Expert
 

by Channa Kasturisinghe

Anywhere in the world, at any given time, there is at least one employee who is desperately seeking ways of bringing to the notice of relevant authorities about an unlawful conduct or financial malpractice taking place in the organisation he or she works.

The absence of a mechanism for employees to raise their concerns about what is happening at work is one of the main shortcomings as far as fraud prevention is concerned. However, specialists in prevention and detection of financial crime believe that 'whistle-blowing' could be a highly effective method that can be adopted by any company as a part of its fraud prevention strategy.

David Cafferty, an internationally renowned Certified Fraud Examiner said in Colombo yesterday that in a scenario in which losses due to financial crime is increasing at an alarming rate such a mechanism is vital in fraud risk management.

He said that according to the Association of Certified Fraud Examiners (ACFE), the losses due to fraud is about US$ 400 billion worldwide. "The scale of fraud in countries like Sri Lanka too can be very high," he said. He said theACFE has found out that more than 50 percent of frauds come into surface as a result of tip-offs and about 60 percent of which come from employees.

"Good intelligence is the best defence against your enemy - the fraudster - and your best sources of intelligence are your own staff and your other stakeholders," he said.

He said that an example of legislation on whistle-blowing is the UK's Public Interest Disclosure Act of 1998.

The act offers potential protection for disclosure by a `worker' of information about offences which qualify to be financial crimes.

"Whistle blowing method will only need an appropriate policy, a designated phone line and manpower. However, there are several benefits. It reduces fraud risk in a company to a great extent. It ultimately contributes to the improvement of your business," he said.

Cafferty is a member of Chartered Institute of Management Accountants (CIMA) Technical Advisory Group specialising in financial crime and money laundering. He visited Sri Lanka to address a seminar organised by CIMA Sri Lanka.