Top Priority for White Collar Law Firms & Internal Counsel: Properly Investigating Confidential Complaints of Fraud, Corruption, and Money Laundering
Fraud, corruption, and money laundering can cause tremendous damage. When cash is diverted for personal gain instead of being used for investments in growth or shareholder dividends or better employee pay, or when employee pensions are stripped, crisis ensues. Stock prices can plummet, regulatory or criminal investigations may be launched, and shareholder lawsuits will often follow close behind.
Whistleblowers are 10x (!) more likely to alert the world to the existence of a fraud than a company's auditors. Indeed, whistleblowers are consistently the #1 source of insights about potential fraud, corruption or money laundering, according to data collected by the Association of Certified Fraud Examiners over the past two decades.
It appears possible that the importance of whistleblowers is still on the rise. In Europe, for example, whistleblower reports in 2020 increased by 40%. In the United States the Securities and Exchange Commission (SEC) reported whistleblower complaints increased 35% during the pandemic. With more and more people now working from home, it is believed that these figures could climb even higher. Governments are implementing fresh legislation to protect the rights of whistleblowers, thus giving new protections for whistleblowers seeking to come forward and make allegations of wrongdoing.
Because whistleblowers play a critical role in uncovering fraud, corruption, or money laundering, it makes good business sense to invite whistleblowers to come forward as early as possible, and before too much financial harm has been caused. Likewise, when whistleblower allegations are investigated quickly and effectively, some of the collateral damage can be limited.
Practical & Cultural Challenges in Asia
I-OnAsia has over two decades of experience assisting corporate counsel and white collar law firms with whistleblower investigations in the Asia region.
Key areas for whistleblowers experience include the areas of:
Compliance & Risk
Health & Social Care
Worker Health & Safety
In our experience, there are some common practical and cultural challenges in Asia that we are asked to overcome:
Communications technology / platform differences. Sometimes a whistleblower in Asia will have difficulty in accessing a whistleblower hotline or website, or feel that the information submitted will not be treated securely, and so may send a letter, which can difficult to follow-up on, or they enter incomplete information into an electronic submission.
Cultural issues. Sometimes employees may not respect the purpose of a whistleblower hotline and make false statements about a supervisor or co-worker in the form of a whistleblower complaint, knowing that it may be difficult to "prove a negative" - (ie. definitively ruling out that a complaint is untrue). Sometimes employees may withhold critical information or be unwilling to come forward with facts they have for fear of being disloyal to the community.
Systemic issues. For example, a whistleblower may actually allege fraud or corruption against a third party monitor who had originally been hired to prevent a fraudulent activity. A whistleblower may allege an activity that is against the laws of one country, but providing information about the fraud may be a breach of the laws of a home country,.
Here is a step-by-step guide to how I-OnAsia approaches whistleblower investigations in Asia and how we coach our clients:
Step 1: Don't Make Things Worse
Over the last 20 years, I-OnAsia's team has seen more and more requests for investigational support, where a whistleblower has courageously come forward to report a wrong doing which has had the potential to destroy years and years of hard work overnight if it had been ignored. On the flip side, these investigations have also demonstrated that the allegations/complaint were baseless and could be proven so with a competent, transparent and robust investigation being undertaken. Irrespective of an outcome, the key is for executives, senior leaders and HR managers not to bury their heads in the sand and hope all will just 'blow over', designing and implementing whistleblower policies and then following them is critical in immediately demonstrating the attitude and culture of the organisation.
The same goes for managing the welfare of whistleblowers. Very few people get up in the morning with the intent to cause serious harm and disruption to the organisations they work for, and in turn potentially throw their own personal careers into turmoil. The very policies and procedures that are written need to protect those that come forward with allegations, and ensure that the processes that follow are transparent, respect the welfare and the rights of those that come forward, and of those who are the subject of an investigation, and allow the information and or evidence to lead the investigative team to a conclusion.
More often than not, poor investigations or poor investigators more to the point will allow their personal bias to dictate the direction of the investigation and come to a conclusion that they have determined rather than allowing the evidence and statements provided to do that.
Step 2: Stay Ahead of the Curve
It is critical to the success of any organisation that they have effective policies and procedures when it comes to whistleblower complaints.
Good policies will allow an organisation to demonstrate expectations to its people, manage and correct poor culture, and most importantly protect whistleblowers from being isolated, dismissed as a result of their report, or not being supported in a manner in which they should be for coming forward and making a complaint.
Providing employees with a platform that allows them to report is important, all whilst in the business so they can importantly continue on with their work. This methodology assists in process of supporting them, and allows for a better internal investigation to take place.
After a report has been made it is important to gather as much information from the reportee as possible, this will allow investigators to immediately define the scope of the investigation and understand the gravity and seriousness of the allegations.
Step 3: Get Investigative Management Right
One of the greatest challenges to an organisation early on from a whistleblower complaint is whether they should immediately report a matter to a specific regulator or body, or carry out an internal investigation to establish all the facts and make a finding/s.
The greatest benefit to reporting early is the ability to reach out for support, to seek investigational assistance, and to demonstrate a total transparent process with both regulator and organisation working together to identify and establish the facts.
When a reputation is at risk of damage from allegations, it is critical that every effort is made to demonstrate leadership, demonstrate responsibility, demonstrate transparency and demonstrate support to those reporting.
Allegations can vary in their nature and seriousness, and an investigator should immediately try to identify the 'subject person/s' so as to ensure that if the conduct is serious enough, that action be taken to prevent any further acts either being carried out, or further damage being caused, whatever that may be.
It is also important though to be mindful that the extent of the investigation may grow and that the whistleblower may not have named all those involved in the allegation and or reporting, this will all need to be considered by the investigations team that is put together to investigate the matter.
The next most crucial aspect of a whistleblowing investigation, is the formulation of a team. A team which should be a small as possible as these investigations largely should be on a need to know basis, it goes without saying that anyone who is suspected of being in 'close proximity' to the enquiry should be excluded from the entire process.
From I-OnAsia's experience of supporting and leading these investigations it is has been the following people that have supported these matters.
Investigator/s - There should always be preferably two investigators, so as to corroborate and support the investigative strategy.
Head of Legal Counsel Internal/External.
Head of HR.
Head of Risk & Compliance.
Acute Communications specialist to manage any communications both internally and externally.
Whistleblowers should be communicated with regularly, however these updates and the expectations should be set early that this communication cannot dominate the process. Regular intervals of advice and updates as to progression of the matter will suffice, and to support this, it is crucial that any additional care and support be afforded to the whistleblower to ease any concerns and provide a communication arm into the investigations team, but this support role must not be directly involved in the enquiry, again to demonstrate no conflicts, and a totally transparent process.
Step 4: Record, Record, Record.
If there is anything an investigator must do well, it is making contemporaneous notes, recording meetings, articulating decisions, and making notes of all conversations and statements made in accordance with local policies and procedures.
Step 5: Know The Rules
Each country, state and region has its own legislation and guidelines of the rights that should be afforded to all those that are subject to an investigation, from the rights to remain silent, to their rights to have support people present during an interview and to seek legal advice if required. These should be well known prior to any investigation being undertaken.
Step 6: Don't Be Afraid to Ask For Help
Failing to investigate a whistleblower complaint properly can have devastating effects on those involved, and have long lasting impacts on the reputation of an organisation. With the stakes raised high, there can be major benefits to asking for help. After more than 20 years of investigations and over 17,000 cases to date, I-OnAsia's global team from Hong Kong, to New York and London have sadly seen the ramifications of poor investigations, and consult regularly on how to get whistleblower investigations right, and how not burying your head in the sand and that supporting the process and the people, can actually bring you out on top if done properly.