Giving their view in this week’s Market Watch are:
Robert Sinclair, director of AMI
Gemma Harle, managing director of Tenet Lime
Karen Babington, corporate sales director at My Home Move
Robert Sinclair, director of AMI
Mortgage fraud has three clear aspects:
- Those cases where income or employment is not entirely accurate.
- Those where the value of the property may not be accurately reflected in the valuation.
- Those where the title to the property is invalid.
In addition there is the risk of being involved in money laundering or where funds are diverted.
With increasing scrutiny of historic and current cases by lenders, firms need to take care that a single rogue employee does not call into question the firm’s overall agency.
In recruiting any broker, a firm needs to ensure that they get a robust CV, without gaps, and at interview stage challenge reasons for moving on from previous employment.
Many firms no longer see the taking of references as important, but they do keep applicants more honest.
In addition, it is important to consider whether credit checks, criminal record checks, or review of the Credit Industry Fraud Avoidance System’s staff fraud database should be undertaken.
This can be both before employment and on an ongoing basis.
In truth, the way in which brokers are monitored and supervised is important. Firms that have robust file checking and undertake accompanied visits on a random basis are likely to avoid poor behaviour and those brokers who might be considering assisting fraud will go elsewhere.
In addition training programmes that show brokers the types of fraud in the market place, how to identify them and to whom suspicions should be reported are good controls.
The key to keeping bad brokers out will be the Financial Services Authority’s (FSA) individual register of mortgage advisers.
AMI has been campaigning for this for many years.
If the FSA is serious about preventing fraud, it will move this up the priority list as an effective tool to identify those who do not work within the rules and keep them out of the industry.
Gemma Harle, managing director of Tenet Lime
The regulatory status of firms will help inform their approach to this issue.
For example, as a network, our appointed representative (AR) companies benefit from our own comprehensive audits that require records of individuals’ personal credit histories, verification of their assets and liabilities, and references from previous networks or employers.
References should always provide full details of any complaints as these will contextualise their outcomes and seriousness. Ultimately, if we uncover something that an applicant should have disclosed, then we will decline them and their business.
However, the situation is different with directly authorised (DA) brokers.
A firm’s DA status means networks cannot and should not act in a way that renders the status meaningless. The onus is more upon the firms to prove their non-investment brokers are fit to trade. We recommend to all DA firms that they undertake checks similar to the ones we conduct for our ARs.
There is no doubt in my mind that the delay in individual registration is a setback.
It will remain difficult to stop rogue brokers turning up elsewhere until this is in place. In its absence firms need to ensure candidates provide full references before employment.
Whatever the status of a firm, the brokers it recruits need thorough vetting and ongoing regular and irregular checking. Fairness to both firms and individuals means any firm should demand a high level of information to come to the right decision.
There is now more scrutiny and procedure throughout the mortgage sales process, but the hand-off points and differing regulatory requirements of all the players still mean that, until the regulator can oversee the entire process, we will have to remain extremely vigilant.
Karen Babington, corporate sales director at purchase conveyancer My Home Move
Lenders, lawyers and brokers all have a common goal to minimise mortgage fraud in the mortgage industry.
Recent analysis by CIFAs identified a 62.5% increase in successful application frauds from the previous year, signalling a resurgence of application fraud as a fraud technique of choice and a reminder that we need to remain vigilant.
Panel managers and lawyers that have brokers as introducers of conveyancing cases can help this by:
- Carrying out checks when taking on a new broker introducer
- Ongoing monitoring during the currency of the relationship
- Making further enquiries if the introducing broker changes their bank account details, moves address or company
- Being brave enough to turn down work if concerned
Lawyers will carry out a number of checks when conducting the conveyancing on the client, the other sides’ lawyer and the broker, where they are not known. This will include verification of identity and questioning unusual instructions.
Where a suspicion of fraud arises, it should immediately be reported internally, by the fee earner, to the Money Laundering Reporting Officer (MLRO).
The suspicion of a fraud should also be reported to the head of conveyancing. The MLRO and the head of conveyancing will then decide what action should be taken, such as submitting a Suspicious Activity Report (SAR) to the Serious Organised Crime Authority (SOCA), contacting the FSA and/or the police.
