Skipton foils £60m of mortgage fraud and scams in 2020
The lender said its team of financial crime experts worked hard throughout 2020 to protect customers.
Additional measures to protect customer funds and make products unappealing to fraudsters has helped contribute to a marked fall in fraudulent activity, which has dropped by 45 per cent compared to 2019.
In particular, the society has seen a reduction in savings account frauds, such as authorised push payment fraud.
It comes after Skipton introduced the Nominated Account Verification Scheme, which allows customers to only transfer money to accounts in their name.
This has prevented customers from sending funds directly to fraudsters, and provided an opportunity to stop and question the withdrawal they have been asked to make.
Ian Walker, Skipton Building Society’s head of financial crime, said: “This year has been a difficult year for many, for a variety of reasons and at Skipton we want everyone to feel like they are in a good place.
“Unfortunately, there will always be people out there looking to exploit the situation and its incredibly important for everyone to be clued up on the latest scams and fraud trends, from pension scams and phishing emails to Covid-19 and romance scams.
“At Skipton, we work hard to protect our customers and our team of experts are on hand to support customers who believe they may be a victim of fraud.
“The team this year alone have prevented over £60m in fraudulent mortgages and scams – spotting and preventing numerous attempts at defrauding others. And while it’s pleasing to see this, and the number of cases going down, we all still need to be vigilant and ensure we all make it as difficult as possible for criminals to exploit the customers or the society.”
Deputy council leader quits over connections with mortgage fraudster
John Fenty stepped down as deputy leader of the North East Lincolnshire council and relinquished his role as cabinet member for regeneration, skills and housing to “avoid an unwarranted distraction”, according to a report from the BBC.
Conservative councillor Fenty set up a property development company in April with Alex May. May was formally known as Alick Kapikanya, and was convicted for his part in a £3.5m mortgage fraud in 2014.
May was given a six-year jail sentence at Manchester Crown Court after he was found guilty of sharing loans with another property developer Marshall Joseph which had been fraudulently obtained on houses they did not own.
The gang, which included five others, targeted elderly homeowners across the north of England including Lincolnshire from 2007.
May was seen attending a fixture at Blundell Park, Grimbsy Town’s football ground, on Saturday sitting in the director’s box.
After May’s appearance at the stadium was reported by the Grimbsy Telegraph, it later emerged that May and Fenty had set up a property development company called Town Centre Living in April this year.
In a statement reported by the BBC, Fenty said: “After reflecting on recent media reports and the impact on both my party and the council itself, I have taken the decision in the best interests of all concerned and to avoid an unwarranted distraction to the enormous progress being made in the borough.
“My decision will allow me to focus more on my other business activities and the football club I’m passionate about.”
Grimsby Town said May wanted to buy £1m of shares but his approach was rejected.
Fenty will continue to serve as councillor for the Humberston and New Waltham ward.
‘Don’t be afraid to ask probing questions’ to prevent mortgage fraud, brokers told
In a guide outlining typical fraud processes, the body urged brokers not to submit any cases to lenders which they were suspicious about and published key ways advisers can stop and prevent fraud.
The SMP guide emphasised that it was vital lenders and intermediaries continued to collaborate to manage the risk of fraud – and advisers should inform their clients of the costs.
“It is also important that borrowers understand the consequences of making false disclosures on a mortgage application,” the SMP said.
“Where fraud is identified, lenders may not only decline the application, they may also provide details of the transaction to national fraud databases to help prevent future fraud attempts.
“This action may impact on a customer’s ability to obtain financial products and services in the future.”
In a section dedicated to first-time buyers, the SMP urged advisers not to be afraid to ask “probing questions” of prospective borrowers and talk to them individually if necessary.
“This may be necessary if you feel one of the applicants may be withholding key elements of their personal circumstances from their partner,” it said.
Recession and economic uncertainty
With greater uncertainty expected in the economy as the effects of the coronavirus pandemic and lockdown restrictions are felt, advisers may need to be more alert to the risk of fraud.
The SMP noted that having “an effective approach to assessing the plausibility of customer circumstances is especially important in times of wider economic uncertainty”.
“Periods of downturn or recession are likely to have a significant effect on income in many different parts of the employment market,” it continued.
“However, this may have more of an impact where applicants rely on income from self-employment.
“Many lenders base their decision to lend on income from recent trading years, but the borrowers’ ability to sustainably afford the mortgage commitment remains paramount.
“On this basis it may be prudent to apply an enhanced level of plausibility when discussing your customers’ income and employment circumstances,” it added.
Tips and tools
The guide also includes tips and tools to help advisers spot suspicious applications.
Society of Mortgage Professionals chairman David Thomas said: “We all have a collective responsibility to combat fraud and financial crime in the sector.
“With continuously new and emerging technologies changing the way we do business in the mortgage profession, the methods of fraud are constantly changing, too.
“As such, mortgage professionals need to keep abreast of these changes to protect the ability of the profession to keep serving society, and enabling people to become homeowners.”
The guide can be downloaded from the SMP website.
Mortgage income fraud on the rise – iVENT 2020
Staged income is where applicants falsely represent their earnings in order to qualify for affordability and confirm employment.
In his online presentation, Paul Fothergill, compliance policy and regulatory development manager at Sesame Bankhall Group, said: “One of the most common things that’s been seen over the last few weeks is staged income.
“An example would be where a customer has recently started a new employment to supplement existing income or they start receiving a significantly higher income a few months prior to applying for the mortgage.”
Fothergill warned it can be difficult to spot fake payslips or bank statements as realistic imitations can be easily obtained from the internet.
However, there are steps that can be taken to make sure fraudulent applications are stopped in their tracks.
Fothergill said don’t “take things the customer says at face value” always cross reference statements and check information that is provided.
Overall, administrators need to consider the “plausibility for the whole picture” of the customer.
This means ask for further payslips where something doesn’t make sense or feel quite right.
He recommended looking for inaccuracies on payslips – check the company name against Companies House.
Common errors on fake payslips are tax codes that don’t match up.
Aside from fraud, Fothergill spoke about the Financial Conduct Authority (FCA) and its concerns around vulnerable customers in the current climate.
The regulator feels the coronavirus pandemic is likely to increase the number of vulnerable customers.
No specific type of person can be classed as vulnerable, so brokers and administrators talking to customers need to try to pick up potential issues through conversations.
Where a customer is identified as vulnerable, processes should be adapted to make sure they don’t suffer any detriment.
Tech is essential for advisers in the fight against mortgage fraud – Murphy
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.
Keystone BDMs to review cases and lender helps brokers prevent fraud
Mortgage applications will now be reviewed by BDMs to check they meet lender’s criteria before they are passed to the underwriting team.
The buy-to-let lender has also set up a process to accept independent legal advice by video in cases where ex-pats apply through a limited company.
And it has introduced an option for video meetings between brokers and business development managers (BDMs), additional to telephone and email.
As an extra safeguard, given the increased reliance on technology, the lender has brought in new measures to help brokers identify possible fraud.
And it produced a step-by-step guide for brokers and their clients on what to expect when signing documents remotely.
“We deployed a contingency plan allowing us to continue supporting brokers and their clients throughout the pandemic,” said David Whittaker, chief executive at Keystone Property Finance (pictured).
“We had to change the way we work. As the mortgage market begins to bounce back, we want our new processes to be part of our longer-term plan to provide the best possible service,” he said.
Solicitor struck off after being jailed for aiding mortgage frauds
In January 2019 Ross McKay, then from Handforth in Greater Manchester, was found guilty of assisting a couple in developing a property portfolio based substantially on fraudulently obtained funds over at least a five-year period.
The portfolio was substantial, with the judge sentencing McKay to seven years in jail on the basis of over £1m being involved.
In a ruling issued last month, the Solicitor’s Tribunal ordered McKay to be struck off from the solicitor’s roll and to pay costs of £1,450.
Significant harm to the profession
The tribunal noted that McKay’s conduct had caused significant wider harm to the reputation of the profession arising from his conviction for serious offences related to money laundering.
“Keeping the solicitors’ profession free of money laundering, and complying with its legal and regulatory requirements, is in the interest of the profession and the public as it is a key way of disrupting serious crime,” said tribunal chairwoman Alison Banks.
The tribunal added that aggravating factors applied to the misconduct.
It noted the breaches took place over a lengthy period and that McKay knew or should reasonably have known he “was in material breach of obligations to uphold the proper administration of justice and protect the reputation of the legal profession”.
It was also noted that McKay had made early admissions and did not contend that he should be struck off.
At the time of his sentencing, Greater Manchester Police economic crime unit senior financial investigator Adrian Ladkin said: “McKay was fully aware that the purpose of the transactions was to launder criminal proceeds and he was deliberately dishonest in facilitating them.
“As a solicitor, McKay was in a position of trust, but he spectacularly failed in his legal duties through his corrupt and unlawful actions.”
Lawyer found guilty of professional misconduct in mortgage fraud case
The solicitor was found guilty of professional misconduct in the case, which saw a 70-year-old transfer ownership of her home to a conman, according to Scottish Legal News.
The Scottish Solicitors’ Discipline Tribunal (SSDT) said Alistair Bowie demonstrated a “serious and reprehensible departure from the standards of competent and reputable solicitors” when he failed to take the necessary steps to prevent the fraud.
Did not query the case
Fraudster Edwin McLaren, targeted vulnerable homeowners in financial difficulty through newspaper adverts.
McLaren typically persuaded victims to sell their homes, with the promise he would clear their debts and allow them to remain in the property rent-free.
After making fraudulent mortgage applications, he arranged for the homes to be bought at discount prices leaving his victims homeless and out of pocket.
Bowie, based near Glasgow, was instructed by McLaren to open the client’s file, who lived some 80 miles away in Dundee.
McLaren has since been sentenced to 11 years in jail.
Crucially, Bowie did not query many parts of the case, including why he had been instructed for a transaction in Dundee, nor ask why the client had decided to sell the property below its market value at the age of 70 and how she came to agree the sale.
He did not discuss with the homeowner the lack of rights she would have to remain in the property once it was sold.
And it was found the solicitor did not advise his client on the terms of the document and failed to stress the conditions which were “warnings which should have been at the forefront of his mind”.
He failed to properly consult the client and had “no authority” to act on the client’s behalf when he requested the title deeds to her property and mortgage redemption figures.
Furthermore, the solicitor did not discuss the consequences of his actions, particularly that she had no right to remain in the property.
He also made a “false declaration” as a notary public when he completed the client’s declaration of insolvency.
Mr Bowie said he was “entirely unaware” of Edwin McLaren’s fraud and “deeply regretful” of the distress caused.
The solicitor considered the case to be a “standard conveyancing transaction” where the client had been introduced by a third party.
However, he reportedly wished he had been “more proactive” in enquiring about the circumstances with the client.
Mr Bowie retired in 2017 after an “unblemished record” of 42 years in practice and did not intend to reapply for a practising certificate.
‘Ought to have known better’
The tribunal accepted that Bowie had been ‘duped’ by McLaren but added “this kind of fraud can only succeed if solicitors are willing to act in these circumstances” .
It added the solicitor “ought to have known better” and considered the professional misconduct “so serious that the only suitable sanction was strike off”.
In a written decision on the matter, SSDT chair Nicholas Whyte said: “Solicitors must always be trustworthy and act honestly. They must act in the best interests of their clients.
“They must have the authority of their clients for their actions. They must communicate effectively with their clients. They must advise clients of any significant developments in their case.”
Man loses properties acquired through mortgage fraud
The assets were seized from Arfan Ali after the NCA discovered they had been acquired from the proceeds of mortgage fraud, money laundering and tax evasion.
Ali acquired five properties all located in the Bradford area over a ten-year period. The money recovered from the bank accounts amounted to £30,000.
Billy Beattie, NCA senior manager, said: “The defendant in this case had built up a property portfolio in the Bradford area, funded by the proceeds of crime.
“It is essential to the economic and social wellbeing of areas like Bradford, and the whole of the UK, that assets are acquired lawfully. The NCA uses all of the powers available to us to target illicit wealth.”
The recovery order was granted at the High Court on 22 January 2020.
Prosecutors seek to confiscate £5.3m from property fraud convict
Fraudster Edwin McLaren was convicted on 29 charges relating to a £1.6m property fraud scheme and jailed for 11 years in 2017.
Lorraine McLaren, his wife, was convicted of two charges and jailed for two-and-a-half years.
McLaren appeared from custody at the High Court in Edinburgh yesterday accompanied by his wife in the dock for the hearing.
The sum sought by prosecutors has been revised up since the time of the original conviction, from £1m to £3m and then to £5.3m.
According to BBC News, McLaren said: “The Crown seem to be in disarray. The people who are doing this don’t know what they’re doing.”
McLaren also told judge Lord Arthurson that he believed himself the victim of a miscarriage of justice and had lodged an appeal with the European Court of Human Rights.
The property fraud case has become the longest trial in Scottish and UK history. The original trial was heard by judge Lord Stewart at the High Court in Glasgow starting in September 2015 and comprising 320 days of evidence.
At the time, Lord Stewart said McLaren had targeted householders in financial difficulty and tricked them into signing over ownership of their homes.
The victims believed they were releasing equity in their homes when actually they were transferring full ownership of their property.
McLaren organised ownership transfers not to himself but to family and friends and he also raised mortgages on the properties.
In one case, the victims, a couple, were living in a cancer care centre when he turned up with forms for them to sign.
The McLarens reportedly lived a lavish lifestyle, driving a Bentley, holidaying in Dubai and paying for their children to be privately educated.
BBC News reported at the time that Lord Stewart said: “The evidence showed breathtaking dishonesty in every aspect of your enterprise by you and those acting on your instructions.”
The police said in 2017 that the case was “one of the largest, most complicated property fraud investigations ever carried out in Scotland.”
Scotland’s prosecution service, the Crown Office & Procurator Fiscal Service, will now seek to confiscate £5.3m from McLaren under proceeds of crime legislation, at a three-day long hearing scheduled for June 2020.