Lenders urged to come clean on internal fraud
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Lenders are being called upon to be upfront about internal mortgage fraud despite worries they might have over reputational damage.
The Financial Services Authority’s annual report last week revealed that in the past four years lenders have reported 700 instances of suspected broker fraud under the Information From Lenders scheme.
And 12 brokers are under investigation by the police, with 31 banned in 2009/10.
But there is growing concern that lenders are not being held accountable for their part in mortgage fraud.
The FSA is due to start its thematic review into lenders’ fraud systems and controls shortly.
But Robert Sinclair, director of the Association of Mortgage Intermediaries, says some brokers are fearful that if they report suspected fraud to the regulator it could go against them.
He says: “Brokers have told me their concerns about some lenders that might have questionable valuation standards or solicitors that brokers are not happy with. I’ve passed these concerns on to the FSA because some brokers feel uncomfortable about doing it.”
Sinclair adds that he finds it hard to believe there is no fraud occurring internally at lenders.
He adds: “I challenge banks to come clean and report to the FSA everything that is going on within them.”
Angus Stewart, chief executive of fraud and risk management specialist e-solutions, says some elements of fraud are deliberately swept under the carpet for fear of reputational damage.
He says: “Even within an organisation fraud can be hushed up because if it gets into the public domain it can cause damage. In particular, firms try to cover up fraud that involves staff as they don’t want to highlight the fact that someone in their company is not above board.”
Stewart suggests the main motive for concealment is to protect reputation, not for financial gain or to protect fraudsters.
An FSA spokeswoman says: “We have lots of avenues where suspected fraud can be reported. We are constantly investigating financial crime and mortgage fraud so we’re open to any information. There’s a section on our website where brokers can report their concerns.”
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