How can we get on top of fraud in the construction industry? [Excerpt]

Falsifying payment applications, covering up the purchase of personal items, diverting money to a phantom company, taking material from the work site for personal use, or using lower-grade material are just some issues plaguing the construction industry when it comes to fraud.

EY’s “Managing bribery and corruption risks in the construction and infrastructure industry (2017)” report, citing the Organisation for Economic Co-operation and Development (OECD), confirms that the real estate, construction and associated industries are among the sectors with the highest level of corruption risk: 40% of foreign bribery cases occurred in construction, transportation, information, and communication.    

40% of foreign bribery cases occurred in construction, transportation, information, and communication...  

Clearly, more companies need to wake up and recognise that fraud and corruption costs, both in terms of profits and the company’s reputation.

Grant Thornton’s 2013 ‘‘Time for a new direction: fighting fraud in Construction" report is full of insight from forensic and investigation teams in Australia, Canada, India, the UK, and the US. Drawing on research from these five countries, the study explored why fraud occurs so frequently in the Construction sector. It also provides practical guidance for organisations that want to identify fraud and mitigate their risk.

The eight most common types of fraud in the Grant Thornton report are: 

  1. Billing fraud
  2. Bid/contract rigging
  3. Bribery/corruption
  4. Fictitious vendors
  5. Change order manipulation
  6. Theft or substitution of materials
  7. False representation
  8. Money laundering/tax avoidance

Read the full article by Dan Stewart on JobSite:

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