• Bob Dillen, Partner |

The latest edition of the KPMG Forensic Fraud Barometer serves as a stark reminder of the ongoing threat individuals and institutions face of white-collar crime. Despite most companies in Switzerland having controls in place to mitigate fraud, only a few have implemented a whistleblowing system to detect fraud during or after the fact.

In 2022, there was an increase of 2.4% in fraud cases, and a 15% increase in convictions compared to 2021. Swiss companies tend to be disproportionally affected by fraud losses over CHF 100,000, yet only approximately 6% have so far voluntarily complied with the EU whistleblowing directive.  With statistics pointing to tip-offs being the most prevalent detection source and Swiss companies having ties to other countries in the EU that have had to incorporate the new whistleblowing directive into their national laws, companies are being urged to make sure they have a proper reporting mechanism in place. 

Beyond the typical controls for fraud and misconduct

With all of today’s technological advancements, most organizations are strategically planning for or have already integrated various fraud detection techniques into their business processes. Understanding how fraud is most commonly detected, particularly in the workplace, can be of tremendous value in strengthening this detection method. While companies believe they are protecting assets against fraud and misconduct through sophisticated controls, this sort of crime is still rampant. If it cannot be stopped before it happens, the second-best way to prevent such activity in the future is to empower individuals who are aware that it is happening or has happened to come forward. 

The provision of whistleblowing channels for anonymous reporting of misconduct and the protection of whistleblowers from retaliation were rolled out in EU countries after the directive entered into force in 2019. However, the same protection is not legally granted to individuals in Switzerland. Given that fraud can occur at any given time, it is up to employers in Switzerland to actively choose to provide a means of reporting and reassure employees that it is safe to do so. Reported fraud ultimately empowers companies to take appropriate action against the individual suspected of wrongdoing, preventing further loss of assets and reputational damage, and/or recovering lost assets. 

Whistleblowing – the leading way to uncover fraud

For several years in a row, the ACFE’s “Report to the Nations” has published statistics showing that fraud is most often discovered through tip-offs, with 42% of cases in 2022 involving a whistleblower.  More than half of these tips were submitted by employees, demonstrating the importance of having a mechanism in place that is accessible to all employees to report suspected fraud anonymously. This suggests that by offering employees the necessary training to increase reporting by 45% and implementing a whistleblower hotline, organizations can reduce the time it takes to detect fraud by approximately six months and cut potential fraud losses by half.  Since a third of whistleblower tips originate with external parties, it is equally important to inform customers, vendors, shareholders and competitors of the designated reporting mechanism that the organization has in place. 

Despite the strides made in fraud detection through whistleblowing over the past decade, the adoption rate of whistleblowing hotlines remains well below 100% in Western Europe.  While many may have rushed to implement a reporting mechanism following the adoption of the EU whistleblowing directive, several others are lagging behind or questioning the effectiveness of their existing system. Our experts can help thoroughly test, assess and evaluate the efficacy of whistleblowing hotlines and reporting mechanisms to identify gaps and areas of improvement. We can also assist in the development of such a system to both incentivize and enable individuals to report suspected fraud while protecting assets. It is recommended that organizations provide anti-fraud training and information on how to use the reporting mechanism. These measures will help deter fraud and minimize losses. 

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