The opportunities for fraud in the real estate and construction industry will increase as growth returns to the sector, according to the latest report.
The ‘Fighting construction fraud in real estate and construction’ report by Grant Thornton’s forensic and investigation experts claims that fraud could account for between 5 per cent and 10 per cent of revenues in the industry.
Recent estimates put the value of the global construction industry at $8.6 trillion, rising to $15 trillion by 2025. If these figures are correct, it means fraud and corruption in the industry could be costing almost $1 trillion currently and, if no action is taken, this could hit $1.5 trillion by 2025.
Following the research undertaken in Australia, Canada, India, the US and the UK, the report warns that urgent action is required to prevent fraud and corruption posing a significant threat to the industry’s reputation.
According to the experts at Grant Thornton, as growth returns to the construction industry this could result in an increased risk of companies being targeted by fraudsters.
The report includes a number of recommendations to help fight fraud, including making better use of technology – an area in which they claim the construction industry lags behind – to identify and gather evidence. It also calls for companies to speak more openly on the issue to increase willingness throughout the industry to prosecute fraudsters.
Clare Hartnell, Grant Thornton’s global leader for Real Estate and Construction, said: “More companies need to take their head out of the sand and recognise that fraud and corruption costs, not only in terms of profits, but also a company’s reputation. It’s a real threat to growth. Fraud is often seen as the cost of doing business. This does not have to be the case.
“Information technology and the internet offer both threats and opportunities. There are many data analytics tools that can help to identify and thereby prevent fraud.
“Companies should consider a more open approach and prosecute perpetrators more often. This will send out a message that the construction industry is not open for fraud.”
Figures from the recent 2013 Kroll Global Fraud Report found that 70 per cent of companies were affected by fraud in the past 12 months. Some 81 per cent said their business had become more exposed to fraud in the last year.
