Fighting Corruption Through
Whistleblower Ethical lines

Fighting Corruption Through Whistleblower Ethical lines

According to the Royal Spanish Academy dictionary, corruption is defined as "In organizations, especially in public ones, the practice consisting of the improper or illicit use of their functions for the benefit of their managers." Put bluntly, corruption is a betrayal. And, like any betrayal, it must remain hidden, at least from the view of those who are betrayed.

Characteristics of Corruption

Corruption is one of the three major types of occupational fraud, as categorized by the ACFE - Association of Certified Fraud Examiners. These types are:

• Misappropriation of assets.
• Corruption.
• Fraudulent statements (mainly involving false financial statements and tax evasion).

Unlike the other two types of occupational fraud, corruption does not leave direct evidence in the accounting records but rather, at most, some hints. For example, while cash or inventory embezzlement will necessarily result in a shortage, a bribe will be negotiated between the corrupt individual and the briber outside of the company's official records. The company might, at most, notice that certain suppliers or customers are receiving unusual benefits at the expense of others. In these cases, the corrupt individual can claim that these were errors or mere inefficiencies and deny fraudulent behavior.

Economic Impact of Corruption According to estimates by the ACFE, corruption, either on its own or combined with the other two types of occupational fraud, accounts for 49% of occupational fraud cases.

Characteristics of Corruption

Transparency as a Countermeasure to Corruption

If everyone knew what others were doing all the time, we would lose our privacy. However, fraudulent and improper behaviors would also be greatly reduced. For instance, it would be difficult to lie to someone who knows all the details of the story we are narrating.

In this sense, a properly managed whistleblower hotline is an ideal mechanism to maximize transparency without compromising privacy. Specifically:

• The whistleblower must trust that their identity and the information they disclose will not be revealed to protect themselves from retaliation.
• The accused should not be aware that they have been reported, and the ongoing report should not affect their reputation until the corresponding investigation concludes.

At the same time, whistleblower hotlines allow for the capture of "unofficial" information not found in the organization's formal records but potentially valuable. This information, if not captured and processed through suitable mechanisms, would circulate as rumors, with inaccuracies and defamations.

Conclusions

Ethical or whistleblower hotlines, when properly implemented, are the ideal mechanism for organizations to systematize the often-proclaimed value of transparency. When transparency is real and functional, corruption is substantially reduced because corruption desperately needs opacity and darkness in information.

Promote transparency in your organization with SHOGUN Ethical Line, and you will create channels for anonymous reporting of possible acts of corruption within your organization.

Author: Guillermo Casal
International consultant and trainer in fraud prevention and investigation and anti-money laundering. He is a Certified Public Accountant, holds a Master's degree in Economics and Administration, and has six international certifications, including the CFE (Certified Fraud Examiner), CIA (Certified Internal Auditor), and CISA (Certified Information Systems Auditor).