Fraud - Conflict of interest

A conflict of interest is a situation where business, financial, family, political or personal interests could interfere with the judgment of persons in carrying out their duties.

For example, there is a conflict of interest if a contractor’s project manager or supervisor, or a member of the manager or supervisor’s family, has an ownership interest in a sub-contractor or supplier, and the manager or supervisor is approving the sub-contractor’s or supplier’s work or payments.  It is a conflict of interest as the temptation or pressure to favour your own or your family’s interests conflicts with your duty to act independently in granting approvals.

A conflict of interest is not normally in itself a crime or civil wrong, as long as it is properly dealt with (e.g. if the person with the conflict declares it to the relevant parties and plays no role in relevant decisions). 

However, if a conflict of interest results in an improper process or outcome, this could constitute fraud (e.g. if the manager keeps the ownership interest secret, and improperly approves a payment or contract variation in favour of the manager’s own company, this could fall within all of the three categories of fraud described in previous slides).