Tom Spender, head of retail enforcement at the FSA, said naïveté about accepting fraudulent identification because it came from another introducer was one of his biggest concerns about the broker market.
He said: “A couple of classic examples where the broker is duped is when the introducer verifies the borrower’s identity by showing a photocopy of the passport or driving licence and then they sign that saying they’ve seen the original.
“There’s always a reason but it’s that sort of naïveté that lets brokers get duped. That’s how it starts. Thinking it won’t make a difference or it’s a hassle to make them go and get the ID original isn’t a defence.”
Income checks
Meanwhile John Hindle, acting smaller firms manager at the FSA, said the regulator was also concerned that lax income verification on introduced cases would mean fraudsters took advantage of brokers.
He said: “Fraudulent introducers may be moving from one broker to another but the one they’re most likely to use is the one who gives them the easiest life in terms of income verification.
“It’s really important the intermediary community work together to ensure there aren’t those gateways.”
Spender said the “classic red flags” should be on advisers’ minds constantly.
“Brokers should always ask themselves: does an application seem believable and is it backed up with bank statements and wage slips which tally?” Spender said.
And he added that brokers should check out multiple cases from one address in the instance that a problem was identified in just one application.
Another red flag scenario he identified was cases that don’t proceed when brokers ask for income verification, particularly if that is repeated by an introducer or borrower.
“We do try on our website and in our thematic review of lenders to give people steers about good and bad practice,” Spender added.
Broker view
Rob Killeen, director at Capital Fortune, said he didn’t think all brokers followed this standard currently and he claimed brokers ran the risk of being “too seduced” by the prospect of income.
He said: “I think a lot of brokers see the golden egg land in their laps and there’s this guy on the phone offering three or four cases if we get this one through.
“It’s not just looking at the passports and documentation for each individual applicant, brokers need to ask who is the introducer, where does he come from, where’s his passport, let me see the original, what’s his proof of residence? I don’t think brokers are always going through that process of vetting their introducers.”
Meanwhile Mike Fitzgerald, sales director at Brentchase Financial, said he did electronic passport checks because it was now so easy for fraudsters to get hold of fake documents.
“But if a broker is getting a lot of business from one particular source, he or she is very unlikely to start questioning a copy of a passport let alone an original. That’s a big danger for brokers,” Fitzgerald added.
Pat Bunton, operations and compliance director at London & Country, said there were simple things brokers could do to help avoid unwittingly perpetrating mortgage fraud.
He said the HMRC income verification was proving useful as well as Post Office database checks and date of birth mismatches.
“We’ve had two or three cases in the past month where we’ve been given payslips and information that doesn’t look quite right,” he said.
“In every instance we’ve asked the lender to do that verification at HMRC after flagging it when we submit the case and in two of those cases there was something suspect. Those facilities are there and brokers should be talking to the lender more about using them appropriately to work together.”
Nigel Stockton, financial services director at Countrywide, said the problem was often down to inexperience and that training advisers to be hyper aware of these tricks was critical.
