We CAN beat crime if we work together

John Malone MS blog

Welcome to my first column.Over the coming months, I will highlight the current trends and issues that are prominent for lenders in combating fraud in the mortgage market.

Fraud is not just confined to the mortgage market. It is a major problem in the UK, with estimates of all types of fraud now costing the UK approximately £73bn in 2012. This figure is up from £38bn recorded for 2011.

The £73bn is made up as follows:

* Private sector £45.5bn
* Public sector £30.3bn
* Individuals £6.1bn
* Not-for-profit sector £1.1bn

The latest mortgage fraud estimates have stayed consistent at around £1bn over the last two years. With that in mind, several of the major lenders which do not subscribe to Experian were somewhat surprised at the level of increase – up by 22 per cent – for the second quarter of this year.

Either way, we can never be complacent and the procedures established by the National Fraud Authority include:

AWARENESS – Raise awareness of fraud among individuals and the private, voluntary and public sectors, launching targeted initiatives to help these groups protect themselve

PREVENTION – Improve fraud intelligence sharing by overseeing the creation of an intelligence sharing roadmap, providing a framework to encourage the exchange of information both within and across sectors. This will focus on online shopping, auction fraud, cheque credit card, online bank account fraud, advance fee fraud, share sale and boiler room fraud and dating scams.

ENFORCEMENT – The Queen’s speech to Parliament on 9 May included the Crime and Courts Bill which will establish the National Crime Agency as the centrepiece of the reformed policing landscape, charged with combating organised and serious crime in the UK.

This Bill lays out the intended functions and powers of the NCA and is progressing through the House of Lords for the planned establishment of the agency in 2013.

ACTION FRAUD – Action fraud is to become the single place where non-emergency reports of fraud and internet crime are captured. This means that by April 2013, all reports that were previously processed by police forces will instead be taken by Action Fraud before being sent on to the National Fraud Intelligence Bureau. This centralisation of fraud reporting will enhance the intelligence picture and allow for reports from across the country to be directed by the NFIB to the most appropriate place.

All these new initiatives will mean that all banks and building societies will have a centralised unit to report suspected and ongoing fraudulent mortgage activity which should make it more difficult for the fraudsters to be successful.

The major lenders such as Santander and Lloyds Banking Group are holding regular seminars for the networks, mortgage clubs and major intermediaries to explain where they currently are.

As reported in this magazine last month, all major lenders have invested huge resources, such as technology, people and training, to minimise their risk to mortgage fraud. That said, the fraudster has become more sophisticated when it comes to forged documentation.

The major police forces, such as City of London and the Met, have seen an increase in fraudulently obtained genuine documentation, which makes it really difficult and probably nigh on impossible for lenders and mortgage brokers to separate the good from the bad.

This is where know your client is so important, especially when dealing with clients remotely.

The Mortgage Fraud Forum, where both the Association of Mortgage Intermediaries’ chief executive officer Robert Sinclair and I represent the intermediary community, has seen an increasing number of representatives from a wide range of businesses join over the last six months.

The sharing of information has without doubt been a major factor in the understanding of all types of fraudulent activity. This working together has seen some very positive attitudes by the legal profession and chartered surveyors.

From the outcome of the lender thematic review by the FSA in June 2011, lenders reported solicitors as their number one source of mortgage fraud risk. This risk was a combination of solicitors failing to register charges, absconding with lender funds, misappropriating funds, failure to complete transactions properly, failure to properly identify customers, and failure to inform the true nature of the transactions i.e. multiple charges on the same property.

From that time in June 2011 the Law Society has introduced the Conveyancing Quality Scheme, Xit2 has created the Lender Conveyancing Exchange and Individual Solicitor Registration – food for thought there on the last one.

Positive initiatives such as this means lenders have much more confidence in dealing with solicitors who are active in the mortgage market.

These are good examples of how we are sharing information with each other and working smarter.

I will be updating intermediaries on how, by working together and being more diligent, we can reduce fraud in the mortgage market.