10 December 2013

SFO spotlight on construction sector

The construction sector has recently come under the spotlight following comments made by the Director of the Serious Fraud Office (the ‘SFO') that it is one of the key industries facing increased levels of scrutiny as a result of the new proactive and aggressive approach being initiated by the SFO in its longstanding fight against economic crime.

In summary, the SFO is an independent government department that investigates and prosecutes serious and complex economic crime and whose aims include reducing fraud and corruption in order to maintain confidence in the UK's business and financial institutions. Its role has expanded as a result of the Bribery Act (the ‘Act') which came into force in July 2011. Of particular relevance are provisions of the Act that make companies and other corporate organisations responsible for bribery committed by their employees unless it can be shown by the companies that they had taken adequate steps to prevent this from occurring.

This statement by the SFO comes after the ‘Transparency International Bribe Payers Index' was published, in which the construction industry was listed as being the sector most vulnerable to economic crime, above the oil and gas and public contract industries. In addition, a recent survey conducted by the Chartered Institute of Building highlighted that the majority of industry specialists polled were discouraged by the negligible amounts of progress that had been achieved in the past decade in the industry's fight against corruption.

The SFO's stance marks a clear shift away from the SFO's traditional reactive approach to investigating financial crime, towards a more proactive and thematic approach, whereby sectors identified as being more at risk of corruption will be actively monitored by the SFO. This new approach has been heralded as a more effective and efficient way of using the SFO's resources, and it is hoped that it will result in progress being made in an industry that has been described as having certain ‘cultural practices' which have been further exacerbated by the economic downturn and the resulting strain that this has placed on businesses.

The construction industry has now effectively been put ‘on notice' and organisations need to ensure that they take appropriate steps to safeguard their position, or they run the risk of being caught out by the SFO's new ‘hands-on' approach.

Our recommended top tips on how to protect your business:

  • Know it when you see it – Have you been offered cash payments/inducements/lavish gifts?
  • Benchmark yourself against market – Is what is offered reasonable?
  • Ensure you have compliance procedures in place to deal with potential issues – Do you have an ABC policy?
  • Ensure your staff are properly trained and supervised
  • Stay on top of legislation and/or market trends that might impact on you – When in doubt, seek advice.

Category: Article