Organizations should want know about any conducts or behaviours that would fall in the following definitions (We will distinguish fraud and corruption).

Fraud is defined as:

"The intentional distortion of financial statements or other records by persons internal or external to the authority which is carried out to conceal the misappropriation of assets or otherwise for gain".

Corruption is defined as:

"Corruption is usually thought of as abuse of office for personal gain, which consists of the offering, giving, soliciting or acceptance of an inducement or reward, in exchange for influence on the action of that person. The gain mentioned above may involve money, sexual favours, advancing family interests or power”.

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As an example, fraudulent or corrupt acts may include:

•  Conflicts of interests e.g. a corrupt relationship can involve an employee setting up a company, the company supplies goods and services to the organisation, the employee does not tell the organisation about it

•  Breach of trust e.g. leaking of confidential or sensitive information

•  Employee misconduct e.g. use of the credit card for private use, excessive use of telephone for private calls, internet abuse

•  Criminal offence

No lists can cover every instance of fraud or corruption. Hence it is important to always use scenario analysis to uncover other possible exposures to fraud.

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Any fraud detection program is hampered by the above mentioned myths and false assumption. In addition, I would like insist of the folowing 2 important points:

•  An organisation's own staff accounts for most of fraud losses.

•  Tips are one of the best way to find out about existing frauds

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Surveys show that an organisation's own staff accounts for 70 to 80% of fraud losses. In 50% of these cases, senior employees are involved in the fraud. They have been in the organization for at least five years and are often in a position to over-ride or circumvent controls that are supposed to protect against fraud.

Furthermore, based on my experience, frauds are usually identified and reported by the following means or groups of people:

Why members of staff are often afraid of blowing the whistle?

The reason is actually very simple especially in Asian hierarchical organizational context. For those current members of staff that do blow the whistle, the consequences can be disastrous!

It is a sad fact to note that far from being recognized as corporate heroes saving the organization from potential destruction, my experience is that most whistleblowers are sidelined or their careers ruined following their disclosure. In too many cases, we can observe the following scenario: a whistleblower alleges that one or a number of long-term members of staff have colluded over a number of years to de-fraud their organization of hundreds of thousands of dollars. Then often the management either ignore the matter or disclose to the person under suspicion. Organizations sometime initiate an investigation reluctantly but often after a short while, decide abruptly to cease the investigation on the basis that it is not producing any convincing results. The whistleblower or a scapegoat is finaly often the one to be punished. Many recent publicized cases have highlighted how whistleblowers are ostracized, bullied, over-looked for promotion, or treated so badly that they have to leave a job that has become untenable.

Furthermore the current volatile economic climate with media reporting on daily basis stories about company staff redundancy programs, falling profits and closures, it reinforcs the feeling of insecurity among the staff of many organization as, whether it is true or not, staff are under the perception that jobs are at risk. This result into a powerful ‘fear factor' in the mind of the employees and the belief that they will increase the likelihood of losing their jobs if they make noise and ‘shake the mud'.

Employees are often the first to know when something is going seriously wrong - be it a serious danger to the public or a major fraud. Unfortunately, All too often, they will not report it and the alarm is not sounded. The result is that the people in charge do not get the chance to take action before real damage is done.

There should therefore be avenues for reporting suspicions of fraud and misconduct. Staff should be encouraged to report suspicions of fraud through various channels including hotline set up for the purpose. It is important that staff know clearly how and where to report their suspicions and that any suspicions of fraud reported in this way is seen to be acted upon by management. Members of the public – such as former employees, customers and suppliers - should also be encouraged to report their suspicions of fraud through advertising campaigns, offering rewards, ensuring that avenues for reporting fraud are widely publicized and assuring whistleblowers that any information received will be treated confidentially.

Having such a policy might also discourage potential whistleblowers from approaching the press. In addition, to be effective, organizations need to nurture a culture in which employees believe their concerns will be taken seriously, and that the protection given by the law and policies is real and effective.

Whistle blowing is therefore a formalised, secure and confidential procedure whereby employees disclose any wrong doings such as fraud, misconduct, breach of any health and safety law, or any other illegal act, either on the part of management or by fellow employees.

Whistle blowing policies aim to ensure that serious concerns are properly raised and addressed in the work place. This is why having a robust whistle blowing policy in place is an essential “good practice” for the fraud risk management of any organization. It is essential for any organization that a whistle blowing policy is in place and that all staff are aware of what is required of them.