One of the most valuable tools an organization can use to prevent and detect fraud and other criminal or questionable conduct is a hotline/helpline. Studies by the Association of Certified Fraud Examiners (ACFE) have found that most fraud detection occurs through tips from employees, customers, vendors or anonymous sources. In ACFE’s 2004 Report to the Nation on Occupational Fraud and Abuse , 39.6% of fraud was detected through tips, compared to 23.8% detected through internal audit, 21.3% by accident, 18.4% through internal controls and 10.9% through external audit. Perhaps even more significantly, the ACFE study found that the median financial loss of organizations with mechanisms for employees and other stakeholders to report wrongdoing was roughly half that of organizations without such mechanisms.

A hotline/helpline does much more than detect fraud and other forms of wrongdoing. Studies by the Ethics Resource Center (ERC) have found that implementing a mechanism for reporting misconduct anonymously has a positive impact on efforts to reduce wrongdoing and improve the effectiveness of compliance and ethics initiatives. Among employees whose organization provides an anonymous reporting mechanism, 84% feel prepared to handle risk, compared to only 64% of employees from organizations that do not provide an anonymous reporting mechanism.

According to the U.S. Department of Labor, more than 60 Federal statutes support or require a methodology for receipt of anonymous reporting and “whistleblower” protections (a full list of the Federal statutes is available in Appendix B). Perhaps the most influential of these mandates has been Section 301 of the Sarbanes-Oxley Act 2002. This section requires all publicly traded companies and foreign companies traded on U.S. exchanges through American Depository Receipts (ADRs) to have an anonymous hotline/helpline mechanism in place. Guidelines also have been adopted around the world. In Europe, their scope and use has been addressed by the Data Privacy Commissioners of the EU Article 29 Working Party. Recently, the French Data Privacy Commission, or Nationale de l’informatique et des libertés (CNIL), issued guidelines for operating a hotline/helpline in France and the methodology that companies must use to register their hotlines/helplines with CNIL.

This guide is also designed to support the evaluation of the performance of an internal hotline system or third-party provider. As this effort evolved, members recognized that the more organizations that conform to the common data points and processes, the better the opportunity for benchmarking. Furthermore, the information and statistical analysis that can be derived from a hotline/helpline can provide indicators of your organization’s overall ethical culture, add enhanced risk mitigation benefits and provide valuable data that improves your business intelligence.