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Regulator may target lenders next as crackdown on fraud intensifies

Lenders are likely to face tough questions from the regulator over the measures they are taking to stamp out mortgage fraud.

Brian Dilley, partner at KPMG Forensic, says he expects regulatory action on mortgage fraud to shift away from brokers and focus on lenders.

He says: “The Financial Services Authority has been active in tack-ling mortgage fraud but it is probably going to be taking more action against lenders rather than brokers in the future.

“It is already starting to ask more questions of lenders such as – how do you know you have found all the problems in your loan book? This not only plays into the financial crime agenda but also addresses the stability of organisations.”

KPMG Forensic’s Fraud Barometer recorded an almost 10-fold increase in mortgage fraud cases in 2008.

It found 25 cases of fraud last year worth some 36m, com-pared with just 10 worth a total of 3.7m in 2007.

The scale of ongoing crimi-nal investigations was also laid bare last week, with the arrests of nine people in connection with a suspected 40m mortgage fraud.

The fraud in question is alleged to have taken place between 2005 and 2007 and is believed to involve more than 500 properties across the south of England.

Bob Wishart, detective super-intendent at the City of London Police, says: “The scale of this operation shows our commitment to investigate frauds and bring those behind them to justice.

“We are determined to not only work with our colleagues across the UK but also liaise with other agencies to mitigate the impact on inn-ocent people affected by the crimi- nal greed of others.”

All nine arrested have since been released on police bail pending further investigation.

It is understood that the main lender targeted in the alleged fraud is Bradford & Bingley.

A spokesman for Bradford & Bingley says: “We are aware of the arrests that have been made and have been helping the police with their enquiries.”

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