Whistleblower hotlines are often presented as an easy and ethical way for employees to report potential fraud within their organization. However, it’s important to approach them with caution. While these hotlines may appear to promote ethical conduct, they are ultimately designed to protect the company’s interests, not necessarily those of the whistleblower. In some cases, using a company hotline could expose you to retaliation for speaking up.

There are two main types of hotlines: internal and external. Internal hotlines allow employees to report suspected wrongdoing directly to the company’s compliance department (or a similar role) within the organization. External hotlines, on the other hand, are typically managed by independent regulatory agencies. These external hotlines may even offer financial rewards to whistleblowers to incentivize reporting and ensure confidentiality and protection from retaliation.

When considering an internal hotline, be cautious. Whistleblower programs overseen by corporate attorneys often prioritize protecting the company’s reputation, creating a conflict of interest between the company’s best interests and those of the whistleblower reporting misconduct. Additionally, many such programs fail to properly warn employees of the potential risks involved in whistleblowing, despite recommendations from local bar associations to do so.

External whistleblowing, when done correctly with the help of a lawyer, can offer significant legal protections and even financial rewards, depending on the nature of the fraud. Regulatory agencies are independent and can handle reports confidentially.