Gemma Harle, managing director of TenetLime, said: “As is very often the case, one of the most bizarre examples of mortgage fraud arose from what appeared to be the least likely set of circumstances.
The broker concerned appeared to be a paragon of professionalism: hard-working, excellent file maintenance and never even stopped to take a holiday. The sort of advisor that any network or lender would be proud to work with.
All his transactions were conducted flawlessly. However, his apparent proficiency was shielding a string of fraudulent mortgages using a fake identity set up by the adviser.
Making it even harder to detect was the fact that he was in cahoots with a like-minded solicitor. Over a period of time they managed to secure sufficient funds to ‘buy’ a total of five properties.
Had checking systems remained the same, they would probably still be doing it now.
In the end, having got away with it undetected for so long, they were tripped-up by greed when an application conspicuously exceeded the level of their previous cases. A query was raised and a subsequent investigation revealed the true picture.
Today, thankfully, anyone seeking to perpetrate a similar deception would find it extremely difficult, thanks to the fact that paper-based systems to verify identity have been replaced by electronic verification. Allied to that is the fact that it is common practice in financial services companies for traders and advisers to take at least two weeks’ holiday. Suspicious eyes would be cast in the direction of anyone who failed to do so.
And despite the increasing variety of technology solutions to counter it, vigilance and attention to detail remain two of the best defences.
Remember: if something looks too good to be true, there’s a fair chance it is.
Ray Boulger, senior technical manager, John Charcol, said:
In general I think clever fraudsters tend to target small firms, as they expect compliance checks to be more robust at larger firms, although obviously this is a generalisation.
We don’t get many attempted frauds at John Charcol, either ones we spot or ones we miss and a lender picks up. With lenders’ far greater access to relevant information than brokers, such as National Hunter, brokers can not be expected to identify some more sophisticated frauds which lenders may identify.
One situation we had was a postal case from a potential Scottish client. We require clients to provide an original proof of ID and this client provided his passport. However, our consultant noticed it had been tampered with.
We called the City of London police, who assumed the person concerned was in our office and sent a couple of police persons along to our office, expecting to question the client. However, when we told them the client was in Scotland they contacted their Scottish colleagues, who immediately said the person was a known criminal.
This was a good example of why it is important to see original ID documents. We would not have detected this fraud had we been prepared to accept a photocopy of the passport.
John Malone, chairman of PMS, said:
The most startling mortgage fraud I ever heard was the team of “solicitors” who set up a shop front for the appearance of complete legitimacy then proceeded to process £16-18m of mortgage applications. Finally, one of the partners fled with millions of pounds.
At the time it was in all the national papers but if you’re asking who can you blame for this, you could point at the Solicitor’s Regulation Authority, but ultimately, you’d probably have to say lenders for not checking who the surveyors were they were dealing with.
This all happened back in 2006/7 and things are very different now. All lenders have reduced their panels significantly and there’s a lot more due-dilgence. Mortgage activity has also reduced and lenders are also defending themselves better with software like National Hunter.
I think so many of the business practices flourishing back then just can’t happen any more. Lenders won’t allow just anyone to instruct valuations so a giant fraud like the one described above is just more and more unlikely to work.
