Call to root out fraud and corruption in global construction industry

The 'Time for a new direction: fighting fraud in Real Estate and Construction' report, published by business consultancy Grant Thornton, calls for urgent action on the issue.

A report by consultancy Grant Thornton says fraud and corruption in the global building industry must be eradicated to keep the sector growing. Paulo Vecina /The National

DUBAI // The UAE can learn lessons from a report into fraud and corruption in the global building industry. The report says it must be eradicated to keep the sector growing.

Time for a New Direction: Fighting Fraud in Real Estate and Construction, published by consultancy Grant Thornton, calls for urgent action on a problem that is estimated to cost companies from 5 to 10 per cent of revenues, or about US$1 trillion (Dh3.67tn) worldwide.

"More companies need to recognise that fraud and corruption has a real cost," said Danny McLaughlin, partner and head of the fraud and forensic division at Grant Thornton UAE.

“Corruption and the payment of commissions is often seen as the cost of doing business. This does not have to be the case.”

Grant Thornton said the UAE is not exempt from fraud threats. It is a pervasive issue and can cost business greatly.

With Dubai making a strong case to host Expo 2020 and Qatar preparing for the Fifa World Cup in 2022, there has been a resurgence in building in the GCC.

The report followed research in Australia, Canada, India, the US and the UK. It said fraud and corruption posed significant threats to building companies’ finances and reputations, and could hinder growth.

It also recommended measures to tackle the problem.

Building companies should ensure they are up to date with information technology.

Frauds should be prosecuted as a deterrent and companies should introduce an internal process to find the best way of dealing with the problem.

“In business, information technology and the internet offer both threats and opportunities,” Mr McLaughlin said.

“Better access to information and data offers great improvements in efficiency and obtaining value for money, but fraudsters can also misuse such technology.

“From a business perspective, the use of data analytics can help not only to identify and thereby prevent fraud, but also allows companies, particularly in the construction sector, to spot poor procurement or contracting practices.”

The report says with the building industry continuing to recover from the global financial crisis, incidence of fraud will also increase.

Companies became more diligent with their finances during the downturn but this level of prudence is now more difficult and arguably less of a priority, said Grant Thornton.

“As a first step, boards should get the subject of fraud on their agenda and board members and non-execs should take real ownership of the issue,” Mr McLaughlin said.