Corporate Corruption and Whistleblowing in Indonesia

 In Articles, Asia, Indonesia

Fraud risk is universally faced by all size of organizations. Unfortunately, these threats often come from dishonest people who have been hired by the companies to carry out their businesses. According to a 2016 fraud survey conducted by the Association of Fraud Examiners (ACFE) Indonesia Chapter and White Collar Crime Research and Prevention Center (Pusat Penelitian dan Pencegahan Kejahatan Kerah Putih / P3K2P), corruption was by far the most common form of occupational fraud in Indonesia, occurring in 67% cases, followed by asset misappropriation (31%), and financial statement fraud (2%). The total loss caused by corruption can reach up to 10 billion rupiah while the loss caused by asset misappropriation can go beyond 10 billion rupiah. With the biggest cases number, corruption is voted as the most damaging fraud in the country.

According to the survey result, the most common fraud detection method was whistleblowing hotline with internal employees as the main reporting source. Whistleblowing is a disclosure of any information or activities that are deemed illegal or unethical within an organization to authorities or public. Whistleblowers can be employees of the organization, suppliers, clients, or any individual who want to raise complaints. An organization that implements a whistleblowing system will promote a culture of transparency, honesty, and integrity. This culture will help the organization to detect and handle early signs of fraud. Some business industries which are more at risk of fraud, such as banking and financial services, as well as government and public administrations have enacted their own whistleblowing policies to provide a clear mechanism in handling reports and complaints.

The Indonesian law does not contain explicit provisions on whistleblowing, however, it provides protections for employees who have knowledge of criminal acts of the employer. Indonesian Employment Law No 13 of 2003 Article 169 stipulates that an employee may submit a request for termination of his/her employment in case the employer persuades and/or orders the worker/laborer to do a deed that is in conflict with laws and regulations. The terminating employee must be entitled to severance, reward, and compensation pay. Protections for whistleblowers (witnesses) are regulated in the Indonesian Witness and Victims Protection Law No. 13 of 2006.

Canary™ Whistleblowing System is a third party hotline provider that enables safe, secure, and anonymous reporting of activities involving misconduct, fraud, abuse, and other violations of company policies. Canary™ provides a combination of various reporting channels and ensures high confidentiality. The service is available for all organizations located in Indonesia, Malaysia, and Thailand.

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