Procurement fraud remains one of the most prevalent forms of economic crime, with 30% of organisations victims of procurement fraud over the past two years, according to PwC’s most recent Global Economic Crime and Fraud Survey.

And yet, alarmingly, only 46% of organisations conducted investigations into frauds they detected, and just 37% reported incidents to law enforcement. These findings expose significant gaps in how such risks are managed and addressed.

The PwC survey also found that 57% of procurement fraud cases involved collusion between internal and external parties, emphasising the need for robust internal controls and vigilance across organisational boundaries.

Gareth Brett, ICAEW’s Interim Director of Trust and Ethics, stresses the scale of the challenge: “With an estimated £23bn lost annually to procurement fraud and irregularities in the UK public sector alone, this issue demands urgent attention and action.”

The effects of corruption extend beyond financial loss. “Corruption’s impact isn’t confined to the economy,” Brett explains. “When it infiltrates supply chains, it results in the mismanagement of natural resources, lax environmental regulations and unsustainable practices. This undermines the UN’s Sustainable Development Goals, harming ecosystems and communities alike.”

Meanwhile, the broader societal effects of corruption on quality of life are far-reaching and multifaceted, Brett says. “Corruption syphons resources away from their intended and most efficient uses, functioning as a regressive tax that benefits the lavish lifestyles of a select few at the expense of the broader population.”

Why corruption in procurement needs addressing

This waste of resources has serious consequences. “Corruption creates perverse incentives that encourage society’s best and brightest minds to manipulate the system for personal gain,” Brett explains, “rather than focusing on innovation and creating new value. The COVID-19 pandemic starkly exposed these vulnerabilities, with conflicts of interest and favouritism inflating the prices of essential PPE.”

Despite the scale of the problem, many organisations remain ill-prepared: 55% of respondents said their organisation lacked a dedicated anti-fraud programme.

The Procurement Act, due to come into force in February 2025, is designed to enhance transparency, streamline processes and ensure fair competition, and aims to mitigate corruption risks in procurement.

What ICAEW is doing

Amid these challenges, ICAEW is stepping up to support the global fight against corruption, with a particular focus on procurement integrity.

To tackle the corruption head on, ICAEW is hosting a special round table on Anti-Corruption and Procurement Integrity on Monday 9 December 2024, as part of International Anti-Corruption Day. The theme for this year’s International Anti-Corruption Day is “Uniting with Youth Against Corruption: Shaping Tomorrow’s Integrity.”

The ICAEW event will bring together leading academics, legal professionals and public sector representatives to thrash out actionable strategies to combat corruption and safeguard integrity in public procurement. The discussion will include a focus on:

• emerging risks in procurement fraud and corruption;
• effective strategies to safeguard integrity under the new Procurement Act; and
• a collaborative approach to fostering transparency and accountability.

Discussions, conducted under the Chatham House Rule, will encourage open dialogue and result in actionable outcomes. The ensuing best practice guidance will provide practical steps for tackling procurement risks and embedding anti-corruption measures into organisations.

Spaces for this in-person event are limited. ICAEW members with expertise in procurement or anti-corruption are especially encouraged to attend. To register, contact Emma Gilfillian at Emma.Gilfillian@icaew.com.

ICAEW’s commitment to integrity

As a signatory to the United Nations Global Compact (UNGC), ICAEW is a supporter of Principle 10, which states that businesses should work against corruption in all its forms, including extortion and bribery.