How to Execute and Measure Your Fraud Hotline

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If you have a fraud hotline at your organization, who is your targeted user? A low-level employee who notices something wrong happening above them? A manager who reads emails about plans of possible collusion? An executive who oversees the bidding process? The answer is everyone, according to Waheed Alkahtani, CFE, CEPP-1, Sr. Auditor at Saudi Aramco. While nearly 50% of all hotline tips come from employees within a company, the other half come from customers, vendors, shareholders, owners and even competitors. This was just one of the many considerations Alkahtani advised delegates at the 2018 ACFE Fraud Conference Middle East in Abu Dhabi to take into account when building and monitoring a fraud hotline.

In his session, Alkahtani shared the importance of creating a hotline that goes beyond being operational. In order for it to produce long-lasting results, it must be customized to each organization and planned with foresight and organization. “The essential element to a project is planning,” Alkahtani said. “A hotline is no exception. Communicate with the proper people in the organization. Get their buy-in.”

He advised the following execution plan:

  1. Establish the hotline scope.
  2. Develop a hotline/reporting policy (who and how).
  3. Define hotline screening and intake process (internal).
  4. Develop marketing and an awareness campaign.
  5. Secure resources and manpower.
  6. Move forward with the implementation stage.
  7. Test the hotline in a pilot phase.
  8. Get management endorsement and approval.
  9. Create a launch campaign with an announcement from the CEO.
  10. Move to the administration and operation stage.

While about 60% of organizations in the Middle East reported having a hotline in place in the ACFE’s 2016 Report to the Nations, Alkahtani stressed that the creation of a hotline is only the first part of the process. What follows are the ways organizations can not only detect fraud, but also help to promote an ethical environment and encourage transparency.

He advised delegates to define what they will report and measures to use to determine its ongoing effectiveness. Examples of what to report include violations of laws, regulations or company policies; falsification of records or reports; or other irregularities like theft and conflicts of interests.

Additionally, organizations can measure tips by:

  • Type: Is the information an allegation or an iquiry?
  • Identity: Is the tip anonymous or named?
  • Source: Is the tip from a group, a location or a certain business line?
  • Level of employee: Is the tip from a manager, a customer or a vendor?
  • Reporting method: Is the tip submitted online, via phone, fax or email? Is it submitted in-person?
  • Life cycle: How long did it take to receive, process and respond to information?
  • Actions: What action was taken?
  • Substantiation rates: How many tips were substantiated?
  • Geographic distribution: Where do the majority of your calls come from?
  • Trends against prior years: What was different or stayed the same from your data and metrics surrounding your hotline?
  • Call volumes: Do you have more calls at the beginning of the year? Do calls increase or decrease with organizational changes?

According to Alkahtani, it is vital for organizations in the Middle East to emphasize the importance and value of hotlines especially in the region because of the lack of regulation enforcing them. The region is also battling the highest average losses from fraud. According to the Report to the Nations, losses are the highest in the Middle East and North Africa, with an average of $275,000 per year.

“We want to encourage those who witness something to step forward and report the wrongdoing that they see,” he said. “You have to manage it and administer it. If you don’t put the proper attention, you might mishear or mistreat an allegation and this comes with a very expensive cost."