John Malone, group chairman of PMS recently issued a salutary warning to brokers at the recent Mortgage Expo, that they should take sensible precautions to ensure their procedures are beyond reproach, or they risk being struck off by the FSA.
Eddie Goldsmith, senior partner at Goldsmith Williams, says: “John also said that 70% of fraud is perpetrated by solicitors. Unfortunately, in many instances, solicitors do not know that client applications are being made fraudulently and brokers are at risk of finding themselves in exactly the same situation.
“It is therefore critically important that brokers not only carry out ‘client due diligence‘ as required by the FSA, but also carry out due diligence on the legal partners they work with.”
He says the best way to ensure legal partners are sound is to only deal with known, proven and professional firms.
He says: “Brokers should give preference to trusted rather than the cheapest conveyancing firms and, if in any doubt, should be prepared to recommend their client consider a different firm of solicitors or conveyancers.”
Goldsmith Williams says that fee free remortgaging deals can also be a problem, because clients often have no independent legal representation of their own.
At a time when fraud is on the increase, it is important that borrowers also have their legal interests fully represented.
Goldsmith adds: “It’s easy to assume that all fraud cases involve a chain of colluding parties, but that is not necessarily the case. Some will involve solicitors and mortgage brokers who have no idea their client is acting with criminal intent. It is therefore important that brokers do everything possible to ensure they don’t end-up on the wrong side of the law.”