PwC Whistleblowing in the Private Sector 12 November 2008 Lee Coles.
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Transcript of PwC Whistleblowing in the Private Sector 12 November 2008 Lee Coles.
Whistleblowing in the Private Sector
12 November 2008
Lee Coles
Agenda
1) Overview of the purpose and benefits
2) Where does this come from? - Legislation
3) Key aspects which are consistent across legislation
4) Public Sector/Private Sector
5) What is the situation in the Czech Republic?
6) Data protection issues
7) Means by which was fraud originally detected
8) Selected control measures instituted
9) Real life examples of learning points
10) Suggested best practice
Slide 3 PricewaterhouseCoopers
November 2008
Whistleblowing in the Private Sector
1) Overview of the purpose and benefits
- A mechanism by which an allegation or suspicion of potential wrongdoing or misconduct can be communicated;
- A tool to aid transparency, corporate governance and to encourage proper behaviour;
- Give stakeholders, both internal and potentially external, an opportunity to voice concerns;
- Provide additional opportunities to uncover wrong doing, not limited to external/internal audit.
Slide 4 PricewaterhouseCoopers
November 2008
Whistleblowing in the Private Sector
2) Where does this come from? - Legislation
Australia: Public Interest Disclosure Act, 1994
Aiimed at public sector employees
China: Article 41 of the Chinese Constitution
Whistleblower protection as a constitutional right for all citizens. It empowers all citizens to report misconduct and forbids retaliation.
European Union: Whistleblowers’ Charter, 1999
The Charter establishes the Anti-Fraud Office in the European Commission (EU). It also creates procedures that require EU employees to report misconduct and guarantees due process and protection of the whistleblower if they report misconduct internally. Employees must exercise all internal avenues for reporting misconduct before they can blow the whistle externally and qualify for protection.
United Kingdom: Public Interest Disclosure Act, 1998
The Act protects employees in all sectors from dismissal and other forms of retaliation. In a case where a whistleblower receives notice of termination, the burden of proof falls on the employer to show that the dismissal was unrelated to whistleblowing.
United States of America: Whistleblower Protection Act, 1998Public sector employees receive protection from retaliation when disclosing information. The Patriot Act of 2001 infringes on some of these protections in cases of national security.
United States of America: Sarbanes-Oxley Act, 2002Section 301 (“Public Company Audit Committees”) of Title III of the Sarbanes-Oxley Act of 2002 expands the area, including establishing the following whistleblowers in the private sector. establishing procedures for (a) the receipt, retention and treatment of complaints received by the issuer regarding accounting, internal accounting controls or auditing matters, and (b) the confidential, anonymous submission by employees of the issuer of concerns regarding questionable accounting or auditing matters.
Slide 5 PricewaterhouseCoopers
November 2008
Whistleblowing in the Private Sector
3) Key aspects which are consistent across legislation
- Filter point – a Qualifying disclosure not a malicious complaint;
- Protection of whistleblowers/Anonymity considerations;
- Time and calendar considerations/restrictions;
- Correct process in place and followed.
Slide 6 PricewaterhouseCoopers
November 2008
Whistleblowing in the Private Sector
4) Public Sector/Private Sector
- Traditionally Public Sector rather than Private linked to whistleblowing by legislation;
- Most recent legislation/best practice does not differ across sectors;
- Changed after Sarbanes Oxley 2002.
Slide 7 PricewaterhouseCoopers
November 2008
Whistleblowing in the Private Sector
5) Current Situation in the Czech Republic
- Implementation of the employees protection into the labour law – new Labour Code (Act No. 262/2006 Coll.)
form 2006 – but no special protection is included;
- Czechs are not obliged to report foreign bribery to competent authorities - Section 168 of the Criminal Code
requires all individuals to report certain crimes (the list does not include domestic or foreign corruption;
- New draft law is being prepared – replacing Public Service Act (Act No. 218/2002, actually never in force)
and the Act on Officials of Local Self-Government Units (Act No. 312/2002 Coll.) – it will include provisions
on reporting suspicions of corruption and the protection of whistleblowers;
- In 2006, TI reported that “whistleblower protection need to be substantially improved in …Czech
Republic, Denmark, Germany, Italy, the Netherlands, Norway, Poland, Spain, Sweden and Switzerland”;
- Studies, reports and feedback have suggested that whistleblowing is considered to be undesirable in Czech
culture (occurs very rarely);
- 2007 - GRECO urges Czech authorities to speed up their effort to provide the whistleblower protection.
Slide 8 PricewaterhouseCoopers
November 2008
Whistleblowing in the Private Sector
6) Data Protection issues
- Judgements in France, Germany and Belgium – 2005 verdicts set precedent that whistleblowing procedures were illegal, mainly due to data protection issues;
- Recommendations of the EC Article 29
Working Party, Working paper 117.
Slide 9 PricewaterhouseCoopers
November 2008
7) Means by which fraud was originally detected
Whistleblowing in the Private Sector
10
1
1
6
31
0
1
0
9
19
5
2
0
7
18
16
0
5
9
18
0 5 10 15 20 25 30 35
By accident
External audit
Regulatory authority
External tip-off
Internal tip-off
Whistle-blowing system
Corporate security
El. autom. suspicious trans.reporting
Fraud risk management
Internal audit
% respondents
2005 2007
Corporate controls
Corporateculture
Beyond the influence of
management
Source: PwC Global Economy Crime Survey
Slide 10 PricewaterhouseCoopers
November 2008
8) Selected control measures instituted
Whistleblowing in the Private Sector
Source: PwC Global Economy Crime Survey
42
52
47
61
90
79
32
44
27
22
27
83
65
26
0 10 20 30 40 50 60 70 80 90 100
Whistle-blowing hotline
Corporate security
Fraud risk management
Compliance programme
Internal controls
Ethical guidelines
Anticorruption programme
% respondents
Global Czech Republic
Slide 11 PricewaterhouseCoopers
November 2008
8) Selected control measures instituted (cont’d)
Only 2.5% of Czech companies surveyed did not implement any measures for detection and prevention of fraud
…and
Czech companies have 7 control measures in place on average
… and
the number of companies that implemented a whistle-blowing system has doubled (22% in 2005 vs. 44% in 2007).
Whistleblowing in the Private Sector
Slide 12 PricewaterhouseCoopers
November 2008
Whistleblowing in the Private Sector
9) Real life examples of learning points
- Lack of protection for employees – disciplinary action, tribunals;
- Lack of proper investigation – timing, expertise etc;
- Little consideration for languages or suitability of the system;
- Little communication or support training;
- No evidence of support from Senior personnel (“tone from the top”);
- Inconsistent approach – which can lead to accusations of favouritism.
Slide 13 PricewaterhouseCoopers
November 2008
Whistleblowing in the Private Sector
10) Suggested best practice
- Detailed planning of the process in advance, link to code of conduct, appropriate data protection;
- Documented, consistent approach clearly outlining responsibilities and actions;
- Consideration of the appropriate form of communication for the system;
- Link into internal audit, audit committees, HR, external audit or other stakeholders;
- Appropriate training and communication to staff;
- Performance monitoring;
- Anonymity considerations;
- Expect the worst and be prepared by devising
a robust fraud response plan.
© 2008 PricewaterhouseCoopers. All rights reserved. “PricewaterhouseCoopers” refers to the network of member firms of PricewaterhouseCoopers International Limited, each of which is a separate and independent legal entity. *connectedthinking is a trademark of PricewaterhouseCoopers LLP (US).
Contact
Lee ColesSenior Manager
+420 251 151 288
www.pwc.com/crimesurvey