A previous article by Bob Hunt on advisers’ duty of care recently raised this important issue.
His piece missed a key point, though.
While advisers are the first line of defence against mortgage fraud and they can be liable if fraudulent activity occurs as part of a mortgage transaction, they do not have to fight the battle alone. There is sophisticated technology available to support them in defending both themselves and their clients against financial criminals.
The most common type of fraud in financial services is identity fraud. ID fraud made up 61 per cent of fraudulent activity in 2019 according to Cifas, with 87 per cent occurring online.
An additional threat is income fraud – in the mortgage industry, these incidents occur when borrowers pose as someone they are not, or claim an income they do not receive, to obtain a mortgage.
We saw this most prominently with self-certified mortgages in the lead up to the 2008 financial crash.
Even if fraud only appears in one per cent of cases, the money in question could be substantial. For example, there were 58,890 home purchase mortgages completed in December 2019 alone, totalling £11.9bn, according to UK Finance, meaning fraudulent cases could amount to as much as £119m per month.
Protecting against ID fraud requires a robust solution for ID and address verification.
Performing these checks manually can be costly, cumbersome, and time-consuming. However, through digitisation and automation, these checks can be seamlessly integrated into an end-to-end mortgage process and improve the speed, efficiency, and cost of verification.
Combined with advancements like open banking to connect directly to customers’ accounts and verify income, technology is working to make it easier for advisers to meet regulatory requirements at the touch of a button.
Of course, advisers must also protect their client against the threat of data breaches, which could concede personal information, client money or both.
The risks of borrowers publicising their property transactions via social media and the risk of fraudsters using these details to target emails are important, but it is also important to note that simply being an adviser makes you a key target for financial criminals.
Email is notoriously unsafe and sharing confidential documents through this medium is not only bad practice, it’s dangerous.
Again, this threat can easily be reduced by using a sophisticated tech platform that digitises data, allowing it to be stored and shared securely via the cloud. This provides an additional barrier between client information and fraudsters.
The crucial point here, and the point that advisers must be aware of, is that your duty of care against fraud is vital, but you are not in this fight alone.
By adopting the right tech platform, you can significantly increase your line of defence, and simplify your work in the process.