TECH-SAVVY LEGAL SOLUTIONS

Modern Whistleblowing

Whistleblowing is the single most common means of exposing fraud worldwide. In its 2020 ACFE Report: Global Study on Occupational Fraud and Abuse, the Association of Fraud Examiners reported how occupational frauds are most often detected in Sub-Saharan Africa. The report reveals that “tip-offs”  are by far the most commonly used method when it comes to exposing fraud, with more than 48% of fraud disclosures originating from this method and Internal Audit coming in second at 14%.

What is the meaning of whistleblowing in this context?

There is no one definition for the concept of whistleblowing, however, it can be defined as an individual, who without authorization, discloses information about an organisation, frequently related to fraud, misconduct, corruption, or any kind of wrongdoing. This individual is usually an employee of an organisation or the motivation to disclose stems from the individual’s private or public interest in an organisation.

Additionally, a definition can be found in The Protected Disclosures Act (PDA), also known as South Africa’s Whistleblowing Act: 

Section 1:

“disclosure” means any disclosure of information regarding any conduct of an employer, or an employee of that employer, made by any employee who has reason to believe that the information concerned shows or tends to show one or more of the following:

A criminal offence has been committed; a person has failed to comply with a legal obligation; a miscarriage of justice has occurred; the health or safety of an individual has been endangered; the environment has been damaged and unfair discrimination as contemplated in the Promotion of Equality and Prevention of Unfair Discrimination Act.

Whistleblowing is not by any means a new method for exposing fraud. Throughout the ages, people have used a broad array of mechanisms to disclose improprieties relating to governments, organisations, and certain individuals. Some of these mechanisms include general tip-offs, “hotlines”,  good-faith disclosures, internal and external auditing, surveillance, news media, and in recent years social media.

Despite the availability of mechanisms, individuals remain cautious when deciding to disclose information. There persists a negative stigma around whistleblowing, whether it be the individual’s fear of being met with hostility or silence, the fear that you are seen as disloyal, being labelled as professionally or socially undesirable, and “naming and shaming”,  just to name a few. The truth is that the whistleblowing stigma is keeping individuals quiet, and perhaps in some instances, for good reason. This emphasizes the specific need for whistleblowing education in organistations throughout.

When reporting misconduct, whistleblowers often consider the option of whether to report internally or externally, depending on the nature of the report or the established whistleblowing culture within an organisation. It often occurs that disappointing experiences of whistleblowing cause employees to feel discouraged in the process.  Processes are needed where possible so whistleblowers can place their confidence and trust in the internal process. This will be realized when fraud awareness is established as part of the business culture, through employee training and education.

Organisations who have yet to establish a fraud awareness and whistleblowing culture should consider the fact that an “open-door policy” on its own will not be nearly as effective. Whistleblowing should not be considered as a mere extension of Human Recourses (HR). In addition, whistleblowers should not be made or expected to prove misconduct, but they do however in certain instances possess key information regarding a case. Designated or third-party investigators can work closely and cautiously with a whistleblower, should the investigation be of a more complex nature. The option to remain anonymous remains of paramount importance.

The term whistleblowing is often associated with large organisations or government institutions. It is well worth noting that small businesses are particularly vulnerable to fraud. Studies show that fraud takes longer on average to detect in a small business, which can have devastating effects on a business or practice. Whistleblowing procedures and mechanisms have relevance across the entire spectrum of any business operation, regardless of size. 

Protection in terms of Legislation

The Protected Disclosures Act (PDA) is essentially South Africa’s whistleblowing legislation.

The PDA gives extension to our Constitutional rights, namely “everyone is equal before the law and has the right to equal protection and benefit of the law”, “everyone has the right to freedom of expression, which includes freedom to receive or impart information or ideas” and “everyone has the right to fair labour practices”

In Section 2 of PDA it is noted that the main objectives of the Act are to protect an employee from being subject to occupational detriment on account of having made a protected disclosure, to provide remedies for an individual who has been subject to occupational detriment on account of making this disclosure and to provide for procedures whereby an employee can responsibly and safely disclose improprieties.

Section 6 of the Act notes that disclosure to an employer is considered protected when the disclosure is made in good faith, in accordance with any prescribed procedure authorized by an employer.

As mentioned above, the Act provides whistleblowers with actionable rights and remedies where there has been non-compliance. Employees may approach any court with jurisdiction, including the Labour Court, and pursue any other process allowed or prescribed by any law.

How a whistleblowing culture benefits an organisation

Having an established whistleblowing culture within an organisation creates certain material benefits. It is worth mentioning some of these real benefits.

In a sometimes ruthless business environment, reputation is everything. When it is publicly known that an organisation practice a stringent commitment and adherence towards ethics, a code of conduct, and a whistleblowing culture, their reputation becomes favourable. Reputation can even be considered to be a competitive advantage.

Risk management is a daily part of business conduct. In certain instances, risks are unknown to management and only surface by means of a whistleblowing report. Having access to information brought to light by a whistleblower can significantly decrease the public ramifications of misconduct.

Employee wellness is crucial to any successful and sustainable business. Providing employees with the necessary mechanisms and processes to say something, creates a feeling of empowerment and provides an organisation with exclusive insights.

Financial benefits can be considered as one of the major pros of whistleblowing. Fraud and corruption can amount to large losses in revenue for any organisation. It should however be pointed out that preventing even the smallest revenue losses is considered a  triumph for whistleblowing.

Afterthought

Our rapidly changing world continuously adjusts the environment in which organisations operate. Organisations are facing greater risks and challenges than ever before. As the age of information expands at uncontrollable speeds, ethical and social issues are at the greatest risk of being compromised. Anonymity and privacy can in most instances not be guaranteed. This stresses the need for modern, anonymous, adequate, and safe mechanisms of whistleblowing.

The most effective way to combat these major challenges in this age of innovation is with technology. Innovations have been made and incorporated into whistleblowing mechanisms in recent years, not only locally but also internationally. New age whistleblowing software has enabled individuals to expose fraud in an ethical, compliant, and anonymous fashion.