Sanjay Sidhu
Executive Director, Advisory
One of the changes brought about in the Malaysian Code on Corporate Governance (MCCG) 2017 was the recommendation that boards establish Codes of Conduct and Ethics, and that they establish and implement policies and procedures on whistleblowing.
The need for whistleblowing mechanisms is heightened further by the impending implementation of the recent amendments to the MACC Act. Significant among these amendments are the provisions to make corporations liable for corrupt acts entered into by their directors and employees, and the related Guidelines on Adequate Procedures issued by the Prime Minister’s Department. This latter publication recommends implementation of an “accessible and confidential trusted reporting channel (whistleblowing channel), which may be used anonymously, for internal and external parties to raise concerns…” [para 4.3.1 (b)(i)] as one of the allowable defences by a corporation in case of corrupt acts by its directors or employees.
The focus on whistleblowing mechanisms is not at all misplaced. The Association of Certified Fraud Examiners, in its Report to The Nations 2018, presents telling statistics in respect of misconduct and fraud identified in 2018. Significant among these are:
- Corruption was the most common scheme in every global region.
- 40% of all cases identified were brought to light by whistleblower tips (followed by 15% via internal audit and 13% via management review).
- 50% of corruption cases identified was brought to light by whistleblower tips.
- Organisations with whistleblowing hotlines detect schemes by tips more often – 46% of cases via hotlines vs. 30% of cases without a hotline.
- Employees provide more than half of whistleblower tips, and nearly 1/3 come from outside parties.
- Losses at organisations with hotlines were 50% smaller than those at organisations without them.
The effectiveness and success of whistleblowing mechanisms is significantly dependant on how well accepted they are. Acceptance, in turn, is significantly dependant on how the primary criteria of independence, security, confidentiality and accessibility are met or ensured.
BDO EthicsLine is a mechanism that meets all of these criteria and more and, in doing so, will also help to ensure alignment with legislation and regulatory guidance. It is an online whistleblowing portal that can be easily integrated into your organisation’s ethics and compliance mechanisms, and which meets our eight key characteristics and criteria.
