A quarter (26%) of construction companies suffered from fraud in the last year, with a third of which falling victim to invoice fraud and three in five firms finding the quality of materials unlawfully reduced.
The research collated by Herts Tools also found that one in every five companies have been affected by falsified expense reimbursements, false billing, contractors lying about qualifications, purchase fraud or stealing tools for other projects. A fifth has also encountered bid-rigging, bribery or another form of corruption.
Despite a quarter of these companies experiencing fraud in the last year, two in five didn’t report it to the police, meaning fraud is more common than the authorities believe.
Just for the UK government’s ‘levelling up’ construction projects alone, it’s estimated that up to £10bn a year could be lost to fraud, exposing shortfalls in regulation and fraud protections across the sector.
Stefano Lobban, director at Herts Tools, said: “As many other businesses will have experienced, we have been victims of fraud. Fraudulent hires negatively impact our business, our staff and our customers. We feel there has been a noticeable increase in attempted fraud since the start of the pandemic.
“We have implemented more stringent checks and with our compliance team, we work hard to ensure we communicate with other members of the hire association, our customers and the police and report, share and try to prevent fraud in our industry.”
Declan Rate, CEO and partner at Forensic Procurement Partnership, explained: “The construction industry has always been vulnerable to the threat of fraud and cybercrime, particularly account diversion. This is where a company receives a notification of a change of bank account email purporting to be from a legitimate construction company, when in fact, it is from someone attempting to defraud them.
“Due to the current economic crisis, fraudsters are taking more desperate measures. The substitution, removal, or simple exaggeration of materials used on a project is becoming a frequent type of construction fraud. Contractors, subcontractors and tradesmen may utilise a particular grade or brand of material, or a specific piece of equipment, only to replace it with a less expensive one and keep the difference.
“We recommend “taking five” prior to answering any emails or entering into any transaction to ensure it’s a genuine transaction. Lack of vetting and screening could potentially cause long-term financial and reputational harm. We’d also suggest doing your due diligence when hiring anyone on a project. Check work history, and confirm qualifications and certifications. Ask yourself: Can you perform more background checks? Do they have recent references you can request?”
>>Read more from Herts Tools here.
