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At the end of August, the regulator proclaimed it was “stepping up its fight against mortgage fraud” stating advisers had a responsibility to report such behaviour.

Last week it was revealed the FSA had fined Derbyshire-based mortgage broker Approved Financial Solutions Ltd £63,000 for advice failings. The watchdog found a poor compliance regime had enabled AFS customers to provide possibly false income and employment information in support of their mortgage applications.

However, when pressed if this suspected fraudulent activity among AFS clients had been reported to the police the FSA said it was not within its remit to inform on wrongdoing among consumers.

Robin Gordon-Walker, press officer for the FSA, said: “There is nothing we can personally do about it. They are not within regulation themselves. Normally the people we refer are brokers themselves who are being fraudulent.”

However Mr Gordon-Walker emphasised the fact intermediaries should report any suspicious activity.

He said: “As regulated firms we expect them to follow this kind of procedure.”

While Mr Gordon-Walker acknowledged that individuals had been taken to court as a result of attempted fraud, he was unable to comment as to whether it was likely there would be an increase in this.

He said: “Those criminal powers are not in our control. There have been cases in the past of individuals being prosecuted in the criminal courts for fraud, either for defrauding an adviser or a lender directly by overstating income or colluding with a broker to defraud a lender.

“We cannot speculate how many cases are likely because it is not within our remit anyway.”

Sue Anderson, head of member and external relations for the Council of Mortgage Lenders, said while the FSA was not obliged to pass information about customers on to the police the CML would like to see it share any concerns with lenders.

She said: “For the purpose of reporting borrowers who had overstated their income it would need to be the victim of the crime, which is the lender who would pursue that and take that forward because the police would not accept a crime report from the FSA in any case.

“What we would like the FSA to do is give feedback to lenders about these circumstances where it finds this kind of thing going on whether about individual cases or even if it were in the form of generic feedback. We would like the FSA to go down that feedback route but we do agree that the FSA would not be in a position to refer that to the police and that the police would not be able to act on it if they did.”