The recent FSA thematic review will have landed on CEOs desks with a resounding thump.
It admits weak internal controls still abound. Yes, some progress in the fight against fraud has been made has been made, but hardly from a base of excellence.
Ethics have a tendency to evaporate from the minds of third party professionals and internal management when times are tough. The FSA has identified “common” weaknesses that still exist in lenders anti-fraud programmes and has forced some lenders to strengthen their system of controls.
Lenders shouldn’t rely on industry bodies to drag their anti-fraud provisions up to scratch.
The KPMG fraud report has highlighted how weakening control structures make it easier to commit fraud and also reports on failures in identifying and responding to gaps in control measures.
However, there is real scope for cutting down on this fraud. The remedy is better internal data.
That might not sound ground breaking, but one of the most illuminating pieces of advice from the thematic review told lenders they “should consider how internal data about mortgage fraud can be improved”.
They should sit up and take note. Putting it in layman’s terms, better data means better management of a business and an improved ability to detect fraud.
If quality management information is absent, you’ve got as much chance shooting a clay pigeon blindfolded.
You might hit something now and again, but the vast majority of the targets will fly by without you ever knowing.
The KPMG report found one in seven fraud cases are stumbled upon accidentally. It begs the harrowing question of how much more goes unnoticed?
Better management information gives lenders eyes everywhere, ensuring less fraud slips through the net.
If your data is sub-standard it makes it harder to identify third parties and internal management underperforming on service and makes it harder to spot trends that might avert a potential fraud.
Having old systems, from multiple sources, increases the difficulty of pulling information together quickly, coherently, or at all. Technology providers can standardise that data gathering process, giving lenders the facility of all their data in a single source.
The thematic review found a lack of industry collaboration is undermining the fight against fraud.
Realistically, I think industry initiatives can only take us so far.
It’s important that lenders set their own standard and tackle fraud by relying on better data and tighter control of their third parties.
Mark Blackwell is managing director of xit2
