Lenders need data and the right systems in place to fight fraud
Recent figures from Financial Fraud Action UK reveal that a financial scam was committed, on average, every 15 seconds during the first six months of 2016. That represents a 53 per cent rise year-on-year, with these scams coming in all shapes and sizes. Furthermore, a staggering 56 per cent of UK organisations have been affected by fraud in some way, and it is one of the biggest risk concerns facing board members.
The mortgage market is no stranger to financial fraud. Recent years have seen fraudsters raise their game in identifying weak spots within the transaction chain, so lenders are duty bound to do more in order to keep them at bay. Lenders face a tricky balancing act between implementing effective anti-fraud measures, which address concerns about the risk of identity theft and online fraud, while still offering a frictionless customer experience.
But what can we do in practice to reduce the fraud risks that face us?
Awareness, data and having the right systems in place is a crucial tool in the fight against financial services fraud. At LendInvest we are members of CIFAS, the UK’s main fraud prevention system. It gives firms access to the fraud data collected by government agencies, the police and other industry firms. That membership is a supplement to our existing use of SIRA (Synetics) and other data providers which give us enhanced insight to ID verification, including Sanctions, PEP and Adverse Media. Furthermore, we provide training to our underwriters on the risks faced by fraud.
These data feeds, along with Equifax Insight credit data, are a very powerful resource, supplying us with a range of data on mortgage applicants and how accurate the information they have supplied truly is. It’s crucial that lenders engage with these data feeds, and add in their own information in a structured way. The richer those structured data feeds become, the more they benefit everyone across the industry.
However, the data can only do so much. There is no single algorithm that can look over that data and then decide if the application is credible and transparent. It’s also vital therefore to employ quality and experienced underwriters who know how to cast a truly critical eye over all application data.
While LendInvest is a lender that sees the potential improvements technology can bring to the mortgage market, we have always been clear that technology must be there to support manual decision-making, rather than replace it. Technology for technology’s sake must be avoided. Instead a risk-based approach should be adopted.
In the short-term finance world, some of the attempted fraud focuses around buying the property under value for reasons that aren’t transparent or at arm’s length. There can be good reasons for securing a property for less than it is worth, of course, but there are also cases where borrowers attempt to keep lenders in the dark about the true nature of the transaction. LendInvest’s core principles focus on transparency and disclosure; we perceive any form of non-disclosure as a form of fraud and do not tolerate it.
It comes down to each individual lender, and the checks they carry out. If you want to build a sustainable and scalable business, then you need to demonstrate in word and deed that you are lending responsibly.
Fail to take that responsibility seriously, and there will be no shortage of fraudsters ready to take advantage.
Roy Armitage, LendInvest
Why don’t FCA staff sit more exams to improve performance?
Regarding the news that a new CeMAP qualification will launch this year: while I do not see a major issue with being suitably qualified to offer the advice you give, will we be seeing anyone at the FCA going back to university and sitting further qualifications to do their job? I don’t think so.
This industry seems like the only one that has moving goalposts for what is deemed ‘qualified’. Quite frankly it seems grossly unfair.
Chris Clare, Professional Office