Three ideas come to mind when discussing vendor fraud in construction. Theft of course, false applications for payment and the changing of lump sum costs to time and materials. The one area of fraud that receives little attention and the one that hits hard are those frauds caused by means of “social engineering.”
Social engineering is a manipulation tactic that can happen in any industry, and construction is no exception. Oftentimes ordering and making payments for the most part are done by either email or over the phone. With this type of fraud, a request for funds or confidential information is made to look like it’s coming from an employee’s boss or a company vendor or partner. But the request is made by an imposter and when it’s discovered, it’s often too late. To prevent fraud by Social Engineering, we suggest you begin by implementing the appropriate policies and procedures for the transferring of money, making a payment, or disclosing financial information. Employees especially those that handle payments should receive the proper training on how to identify red flags associated with social engineering, such as receiving untimely (odd hours or those sent in the middle of the night) emails, suspicious voice (and even text) messages asking questions about your bank accounts, who do you bank with or other confidential matters like who might even be the signers on your company's accounts. In several cases, emails have been known to be sent by senders with unknown addresses requesting payment (usually by wire) and have attached invoices that look authentic but aren’t.
Ipsen Due Diligence is available to perform due diligence and background checks when suspicious activity is suspected. In addition, we can further assist by providing services such as financial investigation and litigation assistance if needed in matters where such activity is thought to have occurred and has cost your company money.
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