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Inadequately trained staff put brokers at risk of fraudulent applications – Murphy

by: Conor Murphy, CEO of Smartr365
  • 27/09/2019
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Inadequately trained staff put brokers at risk of fraudulent applications – Murphy
Lenders are making progress in preventing mortgage fraud, but the threat remains serious – there were almost 2,500 cases in 2018 according to CIFAS, and this grew in the first half of 2019.

 

While the mortgage industry must keep up with anti-fraud regulations, including the upcoming fifth Anti Money Laundering Directive (5AMLD), there is also an opportunity for forward-thinking actors to proactively improve the mortgage process.

Advisers are the first line of defence against mortgage fraud as they have the greatest opportunity to raise any suspicions.

They also face liabilities through the Fraud Act 2006 and the UK’s anti-money laundering regulation if they fail to do so.

Advisers can be held financially and even criminally liable if clients use fraudulent identity documents, whether they know about it or not. To avoid this, it is essential they can show due diligence.

 

ID verification

ID and address verification is a key but often expensive, time-consuming, and problematic part of a mortgage application.

Whenever there is manual transfer and checking of documents there is scope for error. As a sector, we have to be better in this area.

Current processes comply with Joint Money Laundering Steering Group (JMLSG) guidance, but they are often ineffective in preventing fraud.

Staff are often inadequately trained, do not have access to appropriate equipment, and few organisations conduct checks in conjunction with authorities. This provides little defence against determined fraudsters.

Improving the ID and address verification process with technology can address these failings, helping advisers meet both the spirit and letter of the law and saving money for all those involved in preventing fraud.

Advisers should look for services that meet all key compliance requirements: recognition by the Information Commissioner’s Office and conformity with JMLSG guidance; governmental or authority certification; use of multiple positive and negative information sources; and use of a transparent process.

A more robust process does not necessarily involve increasing the burden on customers or advisers. Through digitisation and automation, it can be seamlessly integrated into an end-to-end mortgage process and improve the speed, efficiency, and cost of verification.

Slow, manual checks can be replaced by convenient, fast, and secure ID verification, improving the mortgage process for all parties with a serious but simple and effective approach to fraud prevention.

 

More work to do

There must be a cohesive, cross-industry approach between lenders and advisers if we are to truly reap the benefits of this technology.

Advisers need to ensure the systems they use meet required standards, and lenders need to understand these systems better to make the need for certifying original documentation a thing of the past.

Some lenders have already adopted sensible standards that advisers must follow, but there is more work to be done.

Combined with advancements like open banking to connect directly to customers’ accounts and verify income, this technology makes it easier for advisers to meet regulatory requirements. Furthermore, through end-to-end platforms, advisers are not only protecting against fraud, but also creating a more frictionless process.

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