making whistleblowing effectiveeissa.org/presentationpdf20dec13/whistleblower mechanism_dhupi… ·...

Making Whistleblowingeffective

eISSA Annual ConferenceAnti Fraud MeasuresNew Delhi, 20 December 2013

FORENSIC

Sandeep DhupiaHead of Forensic ServicesKPMG in India

1© 2013 KPMG, an Indian Partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.

What is common between ….

Enron

Worldcom

Lehman Brothers

AIG

Satyam

Whistle blower existed, however mechanism lacking


Do we need Whistleblower mechanism?

Occupational fraud is more likely to be

detected by a tip than by any other method. The majority of tips reporting fraud

come from employees of the victim organization.1Whistleblower Hotlines are the most effective means of detection of

Fraud3

In order for boards to fulfill their oversight obligations, the organisations they serve must have robust

whistleblower and compliance policies and programs to encourage reporting that can help identify risk

exposures, fraud, or other illegal activity. 2

Organizations with some form of hotline in place saw a much higher likelihood that

a fraud would be detected by a tip (51%) than organizations without such a hotline

(35%). 1

1 Source: ACFE 2012 Report-to-nations; 2 Source: The Conference Board – Risk Matters ; 3 Source: KPMG Fraud Survey 2012

Employees more confident using whistle blower hotlines to report

fraud. 3


HR

Treasury

Administration

Finance/payments

Inventory

Sales and distribution

Procurement

Do we need Whistleblower mechanism ? …..(contd)

0.8%

1.0%

2.6%

1.8%

4.6%5.2%

6.1%

8.3%

13.9%

15.4%

40.2%

1.1%

1.1%

1.5%

1.9%

3.0%

3.3%

4.1%

4.8%

7.0%

14.4%

14.6%

43.3%

0% 10% 20% 30% 40% 50%

Others*IT ControlsConfession

Survelliance…Notified by Policy

External AuditDocument ExaminationAccount Reconcilliation

By AccidentInternal Audit

Management ReviewTip 2012

2010

Source: ACFE 2012 Global Fraud Study Source: KPMG in India Fraud Survey 2012

Initial Detection of Occupational Fraud

1.5%

2.3%

9.0%

11.6%

12.4%

22.1%

50.9%

0% 10% 20% 30% 40% 50% 60%

Competitor

Shareholder/Owner

Vendor

Other

Anonymous

Customer

Employee

Percent of Tips

By accident

Statutory audit

Business partners/vendors/third…

Anonymous call/letter/tip off

IT controls

Data analytics

Internal audit review

Whistle-blower / Ethics Hotline

Departments most vulnerable to fraud

1

2

3

4

5

6

7

8

1

2

3

4

5

6

7


Mandate from Companies Act 2013

Mandatory requirement

Mandatory establishment of ‘vigil-mechanism’ for directors / employees to report concerns in respect of:o Every listed companyo Companies which accept deposits from the publico Companies which have borrowed money from banks and public financial institutions in excess of fifty crore

rupeesThe details of establishment of such mechanism shall be disclosed by the company on its website, if any, and in the Board’s report.

Duties of independent directors

Ascertain and ensure that the company has an adequate and functional vigil mechanism and to ensure that the interests of a person who uses such mechanism are not prejudicially affected on account of such use

Protection for whistleblowers

The vigil mechanism shall provide for adequate safeguards against victimisation of persons who use such mechanism and make provision for direct access to the chairperson of the Audit Committee in appropriate or exceptional cases

Audit Committee

Companies which are required to constitute an audit committee shall operate the vigil mechanism through the audit committee.


Who investigates? Roles and responsibilities

Who can complain?

What is the expected conduct and behaviour?

What is to be complained about and means of

complaint?

Who does this apply to?

What happens if someone does not

comply?

How are the issues tracked?

How is the complainant informed

of the management action?

Who receives the complaint and what are the next steps?

The Organisational Code of Conduct lays down the guidelines for accepted

behaviours

The Whistleblower Policy outlines what can be

complained about, how and issues such as

Whistleblower Protection etc.

The Redressal Framework provides guidance on what should be done in case a

complaint is received.

Policy & Framework


Establishing an effective whistleblower mechanism

Independent directors should be tasked with the responisbility

Independently administered

Hotline providers with forensic experience

Advertise the mechanism

Anonymous complaints not less serious

Complaints investigated independently

Whistleblower protection

Reward legitimate whistleblowers

Sanction frivolous whistleblowers

Tone at the top


Managing the reporting mechanism

Multilingual support – Service offered in Hindi, English and regional languages , 7am – 11pm on all business days

Anonymity of the caller is maintained to eradicate the possibility of reporters identity being exposed

Multiple Reporting channels available to whistle blowers to report incidents (Phone, Email, Fax and PO Box)

Technical support to meet the operational requirements of whistleblower helpline

Trained staff on effective questioning skills to ensure all the relevant information is captured


Managing the reporting mechanism…(contd.)

Our Operational attributes

Reporting Channels: All the reporting channels (Toll free phone line, email address) are dedicated for each client. This allows clients to chose preferred toll free numbers and email address

Incident Reporting: Individual written reports after two level quality check is shared via email with the designated client contact for each complaint received

Monthly MIS: Monthly MIS on the reported incidents is shared with the client. This can be customized based on client requirements

Dedicated Staff: Dedicated KPMG personnel to manage all the reporting channels

Data Security: Information security standards in line with KPMG’s global policies and Audit logs for each activity performed on a report.

Our value preposition for managing the operations of Whistleblower hotline


Important statistics of Ethics Helpline – Nov’12 - Oct’13

Channel wise distribution Anonymous Vs Identity disclosed

Nature of complaints receivedOur clients

Email42%

Internal Mailbox4%

Phone52%

Post2%

Fax0%

Anonymous74%

Identity disclosed24%

Identity partially disclosed

2%

19%17%

16%7%

6%5%

5%3%3%3%

3%2%2%

1%1%1%

1%1%1%1%1%

0% 2% 4% 6% 8% 10% 12% 14% 16% 18% 20%

HarassmentFinancial Fraud

Corruption & BriberyMisappropriation of company assets / resources

Others (HR related)Conflict of interest

Substance abuseOthers (Administrative issue)

Non-compliance to professional standardsNepotism

Environment, health and safetyDiscrimination

Sexual HarassmentFavoritism

Inaccuracy in record keeping/ financial reportingIncorrect expense reimbursement

VictimizationMisuse of Authority

Workplace MisconductKickbacks

Unfair employment practices

Alternative Energy7%

Automobile15%

Automobile Components

8%

Consumer Products8%

Infrastructure8%

Manufacturing38%

Non-Banking Financial Institution

8%

Transport8%

Thank you

www.in.kpmg.com

Sandeep DhupiaPartner, Forensic Services, KPMG in India

M: +91 9810 266959E: [email protected]

Restriction on disclosure and use of data

The data in this document contains confidential and proprietary information of KPMG, the disclosure of which would provide a competitive advantage to others. As a result, this document shall not be disclosed, used or duplicated, in whole or in part, for any purpose other than to evaluate KPMG. The data subject to this restriction are contained in the entire document.

© 2013 KPMG, an Indian Partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.

The KPMG name, logo and “cutting through complexity” are registered trademarks or trademarks of KPMG International Cooperative (“KPMG International”).

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making whistleblowing effectiveeissa.org/presentationpdf20dec13/whistleblower mechanism_dhupi… ·...

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