Lenders are losing their grip on fraud, says police
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Some lenders have taken their eye off the ball when it comes to detecting mortgage fraud, a top detective has warned.
Chief inspector Paul Barnard at the City of London Police says it is currently investigating 15 serious mortgage fraud cases compared with just four last year.
One case involves a lender being relieved of £100m by fraudsters overvaluing buy-to-let properties.
Barnard says: “You could easily argue that some lenders have taken their eyes off the ball with regard to fraud. We should be learning lessons from what has gone before to ensure we stop it happening again.”
The City of London Police is working with the Council of Mortgage Lenders to help lenders spot fraud.
But Barnard says lenders have not yet got to grips with identifying properties that are overvalued.
He says: “The biggest indicator that a property has been overvalued is that its price is so inflated there’s no way it could be accurate. This needs to be checked at the front end and that means lenders having the right systems in place.
“It doesn’t matter what policy a lender has, it’s about how this works on the front line.”
Barnard says lenders need to balance their desire for completions with the need for security.
Money derived from fraudulent mortgage deals is being used for money-laundering, drug dealing and even to buy boxes at Premier League football clubs.
Barnard says crooks may look for relatives or friends involved in the mortgage market and use them to create openings.
He adds: “It’s frauds committed in bulk that we are most concerned about. For example, if a group has relatives or friends who are mortgage brokers they could use this as an avenue into fraud.”
Margaret Cole, director of enforcement at the Financial Services Authority, warned last week that the responsibility for managing financial crime risks lies with firms’ senior management.
Cole says: “Senior management should take responsibility for managing the risks of financial crime whether these arise from money-launderers, fraudsters or brokers.”
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