Criminals posing as subcontractors have redirected more than £5 million of payments from construction companies into their own bank accounts, Construction News can reveal.
London Metropolitan Police and the Construction Industry Fraud Forum have issued a warning to contractors to be vigilant, saying the criminals are still active and the threat they pose is high.
The activity bears striking resemblance to that revealed by Construction News last month, where fraudsters were stealing hundreds of thousands of pounds from clients by pretending to be main contractors.
Met Police detective sergeant Chris Atack told CN that 10 firms - a mixture of main contractors and subcontractors - had been hit by the new scam. He said £5.5m had been misdirected. However, attempts to steal over £10m more had failed.
There is no obvious pattern to the frauds, which have occurred across the UK and in several different sectors of the industry. The companies targeted have been different in each instance.
The crime sees fraudsters taking advantage of the BACS payment system by sending letters to contractors’ accounts departments purporting to be from subcontractors. The letters advise the firms that the subcontractors’ bank details have changed.
DS Atack said: “They use social engineering to identify individuals in organisations that will be processing their fake invoices. They will look at company websites to identify where they should purport to be from.”
CIFF member and Wates head of internal audit Martin Owen said: “The industry has moved away from cheque payments to direct credit through BACS. To use BACS you need to know the sort code of your supplier’s bank, the bank account number and the name on the account. Those are the only three details you need.”
He added: “These things are always dealt with by accounts departments and they do tend to be done by junior staff. If they see something which purports to come from a subcontractor, which appears with a letterhead that looks reasonable, they will generally process it. They are employed to be processors.”
Mr Owen said the nature of construction jobs meant there were large and frequent sums of money flowing through firms’ accounts. He said construction could be a target because it has only recently migrated to BACS and is still working out the best method of controlling the system.
He added: “Margins are thin at the moment so if one of these payments goes astray and is not recovered, then that has a massive impact on that contractor.”
DS Atack said there was a possibility the scam could even be franchised out to other criminals.
He said: “It’s an organised criminal network and it is diverse in who it’s attacking.
“So far those 10 cases have come right across the country. Knowing how criminals operate, they won’t just set a geographical area when they’re making money.
“From the mind of a fraudster, if a scam is profitable will he stop using it? The answer is clearly no.”
Mr Owen was speaking in his CIFF capacity. Wates has not been a victim of the fraud.
A Bacs spokesperson said: “Fraud using Bacs Direct Credit is extremely rare – we process more than two and a quarter billion payments securely over the course of a year. But we would advise any company to exercise extreme caution when amending details on accounts set up to be paid by Bacs, and verify any changes with a known contact.”