52 | Deloitte | A Middle East Point of View | Summer 2013

Whistleblowing, or ‘Ethics’ hotlines, have gainedprominence in the Middle East over the last fewyears, although it is difficult to identify anylegislation to protect ‘whistleblowers’ within the various Middle East government sectors.However, history provides many instances where the whistleblower, and not the alleged offender, isthe one penalized and people in the Middle East areuncomfortable with the process, which allows foranonymous reporting.

Blowing in

the wind?

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The Middle East is relatively new to the concept ofanonymous reporting and there is a fear that unfoundedallegations could jeopardize someone’s job. The otherpoint is that the Middle East culture historically has notincluded the concept of informing on someone.

The Sarbanes-Oxley Act in the U.S. and other legislationin Europe and the Far East have seen an increased use ofhotlines in the business community. Under Section 301of the Sarbanes-Oxley Act, companies trading on theU.S. stock exchange must provide a mechanism foremployees to remain anonymous when reportingconcerns about accounting or audit irregularities. This is at odds with legislation in certain European countries,where anonymous allegations are not sanctioned.

The Australian Standard 8004-2003 ‘WhistleblowingProtection Programs for Entities’ is only a guideline but is increasingly being used as a basis of ‘best practice’ inother countries, in the absence of any other appropriateguide. That, coupled with an increased awareness ofcorporate governance, has also helped the increase inhotlines. Indeed, some organizations have been createdsolely to provide outsourced hotline services.

Regular statistics from the Association of Certified Fraud Examiners surveys identify that ‘tip-offs’ stillprovide a significant percentage of fraudulent behaviordetections. However, there is a need to balance thewhistleblower’s requirement to maintain anonymityagainst the organization’s need to establish whether the information provided genuinely raises allegations of inappropriate behavior.

The whistleblower also has to rely on the organization’spolicy of protecting a genuine whistleblower, withoutany backup from legislation. So can the whistleblowerrely on the organization to protect him? What must the organization do to provide a whistleblower with that sort of comfort? The answers to these questions are normally found at the top of the organization. Thedirectors and senior management are responsible forsetting the culture of the organization. Therefore, themessage has to go out from the top. The term ‘tonefrom the top’ is often used in corporate governance andculture rhetoric, but it holds true. If the senior playersdon’t provide the leadership, who further down thechain is going to bother?

Whistleblowing

54 | Deloitte | A Middle East Point of View | Summer 2013

By providing outsourced whistleblower hotlinemanagement, organizations can send the message totheir employees that the initial communication will behandled independently to ensure that the allegation isrecorded and passed to the appropriate person. Whatoccurs subsequently depends on the nature of theallegation and the organization. Although internally-operated hotlines can also work well, they aredisadvantaged by the fact that all allegations are initiallyreceived by employees of the organization where thesubject of the whistleblower’s allegation is alsoemployed. This has always been a point of concern.

The processes required to establish the bona fides ofallegations involving junior or middle ranking staff tendto be fairly straightforward. Either internal or externalinvestigators are normally appointed to review thematter and report on the allegations raised. Usually anappropriate senior manager will then deal with thematter after legal and HR advice.

If the allegation is against a senior manager, thesituation becomes a little murkier and the issues maybecome confused. Unless the organization has a robustpolicy for dealing with such a scenario, investigationsrun the risk of becoming compromised by seniormanagement involvement, or of allegations beingignored.

It is really at this level that the true ethical nature of theorganization becomes clear.

In reality, the use of a whistleblower hotline is anotheralternative to reporting issues to management and isnormally only used where the whistleblower isuncomfortable in approaching their line manager or HR department. One of the major issues in dealing withwhistleblowers is that the person taking the initial call is unaware of the history leading up to the contact. For example, it is possible that the whistleblower hasresorted to the hotline as a final act following theunsatisfactory resolution of other avenues. As such, the whistleblower may be under extreme psychologicalpressure, having invested a significant amount ofemotional capital in the matter. With this in mind, from an investigative perspective it isadvantageous that the initial contact should be with anexperienced investigator or operator who has the abilityand training to deal with stressed and anxious callers.Sometimes, if the whistleblower refuses to give theirdetails or contact number, the call receiver may only get one chance to get all the information, although the call receiver may actually be able to convince thewhistleblower that better assistance can be provided ifthe person identifies themselves. It is becoming morecommon for hotlines to be Internet- and e-mail-based.Although this makes it easier to report concerns, itremoves the ability of the hotline operator to gatherpotentially critical additional information at the outset.

Few studies have been undertaken into the motivationof whistleblowers. Only in the U.S. is there a provision toprovide whistleblowers with financial rewards followingsuccessful prosecutions. Anecdotally, the vast majorityare motivated by ethical issues concerning inappropriateconduct by the subject of the whistleblowing. However,it is also possible that some whistleblowers may bemotivated to make allegations with the intent toembarrass someone or for the sake of revenge.

There is a need to balance thewhistleblower’s requirement tomaintain anonymity against theorganization’s need to establishwhether the information providedgenuinely raises allegations ofinappropriate behavior

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It is only by talking at some length to whistleblowersthat an understanding of their motivation may begained. This can prove critical in understanding how the matter should proceed.

Ongoing support for the whistleblower is also importantto ensure that they are comfortable with what isoccurring and are not suffering any adverse treatment as a result of their actions. This fear seems to be themajor reason whistleblowers initially wish to remainanonymous.

Essentially, the key to an effective whistleblowerprogram is two-fold. The first part is dealing with the allegation, but just as important is the ongoingmanagement of the whistleblower. Policies shouldensure that any ‘detrimental’ action taken against thewhistleblower as a result of their allegation should be treated as a serious matter and appropriate action taken.

Whilst the major focus of most whistleblower policies is on whistleblowers, processes should also be put inplace to deal with the person(s) against whom thewhistleblowing allegation is made.

As part of any investigation, the subject should beinterviewed and provided with any evidence supportingthe allegation and offered an opportunity to respond to the allegation. This is known as the duty of fairness,which underpins most legal processes. Once adetermination has been made, the subject of theallegation should be advised of the finding. If theallegation is found to be unsubstantiated, any harmcaused to the subject of the allegation should beremedied, including a statement of outcome fromsenior management if the matter had been made‘public’.

The final issue, especially where no legislation exists toprotect the whistleblower, still reverts to the question of trust. Can the management be trusted to respond to whistleblower allegations in an appropriate manner?The answer comes back to the issue of culture,mentioned earlier. The increasing global acceptance of the need for a whistleblower process means that the Middle East needs to adopt the process in order tocomply with overseas expectations and requirements.Obviously, no one is going to use the system if theydon’t trust it. As with most other cultural issues the buckstops with senior management. If senior managementcan demonstrate that the whistleblower system is fair,transparent and has sufficient safeguards to both thecomplainant and the accused, the program has a lotmore chance of succeeding than where it can’tdemonstrate them.

by David Clements, director, Forensic and DisputeServices, Deloitte Corporate Finance Limited (Regulatedby the DFSA), Middle East

From an investigative perspective it isadvantageous that the initial contactshould be with an experiencedinvestigator or operator who has theability and training to deal withstressed and anxious callers

Whistleblowing