Fraud and bribery in the construction sector – another thorn in the tail

Having previously recognized the high risk of financial crime in the construction sector, Ramsay Hall is now accompanied by a colleague Paul Marshall to give an update on the latest developments.

Ramsay Hall

In previous updates, we identified the high risk of financial crime in the construction sector. We assumed that the current economic climate would increase the number of financial crime due to:

  1. Cutbacks in business budgets as compliance slips down the boardroom agenda.
  2. Individual financial distress that creates a motive for fraud.

Recent developments

Those concerns are starting to be felt – earlier this month the Construction Industry Training Board (CITB) confirmed investigations at nine construction training centers. There is a suspicion that persons from the training centers have received CSCS cards that enable them to work on construction projects if there is no evidence of passing the required examinations or a passed grade has been proven for the support of third parties.

CITB stated a separate concern that gangmasters offered bribes to testing centers to ensure individuals received a CSCS card. Ian Sidney, CITB’s fraud manager, said, “We know these intermediaries turn to good centers and offer them bags of money to bring unlimited candidates to their centers. At a time when companies are struggling, it is almost a shame to turn them down, but what they are offered is not what they will ultimately get. “

The situation is a useful example of the interplay of fraud and bribery, separate crimes but often occurring in the same circumstances:

  1. It is a criminal offense under the Bribery Act 2010 to offer or accept bribes to reward or induce a training center to ensure that individuals can obtain a CSCS card without first passing the required course and exam.
  2. It is fraudulent for a training center to misrepresent that a person has demonstrated the skills and knowledge necessary to own a CSCS card when in fact that competence has not been demonstrated.

Fraud, bribery and allied forms of corruption are usually investigated by the Serious Fraud Office and specialized financial crime law enforcement agencies across the UK. In addition, the behavior of gangmasters is a focus of the Gangmasters and Labor Abuse Authority.

What does this mean for responsible contractors?

Responsible contractors need to have a system in place to ensure that people working on their projects have the necessary skills and knowledge. This can include:

  1. Due diligence prior to hiring agencies that provide workers.
  2. Monitor the quality of candidates provided by agencies and take action against the agencies if there are concerns.
  3. Supervision of workers during projects and removal of workers who do not demonstrate the required competency and / or do not meet safety requirements.

These processes should be established within existing compliance systems. They are important as regulators, including the HSE, investigate workers’ competency in the event of an incident at the construction site. If it appears that these workers did not have the required skills and knowledge, the HSE will take steps to understand (a) how these workers came to be part of the project and (b) the steps the contractor took to determine the competence of the workers.

Authorities are likely to take decisive action if a contractor cannot refer to a system to monitor workers’ competency.

Key messages

The contractors’ compliance focus is understandably on ensuring that adequate risk assessments, method descriptions and other working methods are in place.

These systems are undermined when project staff do not have the skills and knowledge to safely perform their role. It is therefore crucial to ensure that compliance systems actively monitor employee competency.

In view of the developments highlighted by CITB, it is more important than ever to review existing compliance systems.

  • Ramsay Hall is a Senior Associate at Brodies LLP, specializing in white-collar crime and investigations. Paul Marshall heads the law firm’s Corporate Crime and Investigations practice, specializing in managing internal investigations for clients when something goes wrong in the organization.