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Spotting mortgage fraud

This article is part of
Guide to Mortgage Fraud

Ms Newell notes: “For broker firms who use third-party introducers this can be one area that carries a high risk of fraud. A fraudster can look to be a genuine introducer of business to begin with and introduce some genuine clients to gain the confidence of the intermediary.

“Once they have manipulated this confidence it is then that they start to infiltrate the system with clients and deals that have income, property or identification issues.”

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For all firms using third-party introducers for business purposes, including accountants and solicitors, Ms Newell says they need to have robust records of regular meetings with all of the people in the food chain and meet all of them face-to-face to carry out due diligence.

Other areas of fraud can come direct from clients themselves, she says, pointing to unusual transactions frequently exploited by fraudsters such as sales under value; gifted deposit or equity; the deposit coming from overseas investments; and where the client may switch to another solicitor during the process.

Ms Newell says the list is not exhaustive and anything unusual or seemingly out of character for the client or any of the relationships brokers have with accountants, solicitors and introducers needs thorough investigation.

In terms of what lenders are doing to spot fraud, Ms Newell says lenders now have more sophisticated systems that talk to one another about potential fraud cases submitted by intermediaries.

For example, she says if a residential case has been submitted to one lender on a property and another lender receives a buy-to-let application for the same property this is now easily identified between the two lenders and the relevant questions are asked.

A lender that suspects fraud normally uses their internal processes, which Ms Newell says they have a regulatory responsibility to ensure are fit for purpose, so that their business is not vulnerable to fraud. Lenders should also report suspected fraud to the regulator.

Ultimately, Martin Reynold, chief executive of SimplyBiz Mortgages, says advisers must always be mindful of the fact that wherever there is a possibility of gaining a final advance there will always be fraudulent activity attempted.

This is not just in the mortgage arena but all aspects of financial services, he adds.

Mr Reynolds says: “Fraudsters are very adept at finding loopholes, weak spots in a process or inventing new and innovative ways of obtaining monies by deceit.

“The challenge for an intermediary is trying to protect themself from unwittingly being part of this chain. All distributors spend a lot of time helping advisers be aware of the latest areas of concern.