Crime doesn’t pay, or so the saying goes. However, judging by the air time and column inches devoted to crime and how much criminals have attempted to make from it, it would seem that the old adage is outdated. If it comes off, crime does pay. That is not saying that it is right, just that, in a changing world, crime, sadly, is becoming an all too regular occurrence.
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Indeed within the sector in which we operate, the growth of financial crime has been unprecedented, and has forced the Financial Services Authority (FSA), the Council of Mortgage Lenders (CML) and the Association of Mortgage Intermediaries (AMI) to continually to update its guidance on the area to lenders and brokers.
Growing concerns
Lenders have long been warned as to the dangers of fraud and online crime through sophisticated means, with the CML, in its own statement, confirming growth of the sector’s exposure to crime.
It said: ‘Financial crime is an area of considerable concern to all lenders. In its many guises, financial crime is capable of causing lenders significant expense and loss of public credibility. It is also an area of increasing complexity where lenders have to be aware of developments which may adversely affect their mortgage business.’
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Speaking at the Annual Financial Crime Conference, Philip Robinson, finance crime and intelligence director at the FSA, admitted that growing concerns over crime in the industry had led to the formation of a specialist task force, dedicated to tackling financial crime. He said: “In January we set up our new Financial Crime and Intelligence Division so that we could provide a centre of expertise within the FSA on financial crime issues. As part of our new Financial Crime and Intelligence Division, we have created an operations team to give us the capacity to undertake more thematic and case work on financial crime issues, including those where firms or law enforcement agencies may alert us to an urgent problem.
“This is likely to mean us visiting more firms and more often to discuss financial crime issues, as is part of raising the FSA’s – and the UK’s – game in the fight against financial crime.”
An increasing problem
It is clear that financial crime has become an increasing problem for firms and lenders, and many organisations have adopted multi-million pound systems to quell the onslaught of crime in the financial marketplace. But however many barriers lenders and other institutions place in front of those seeking to profit from financial crime, it seems they will always find a route in. Online fraud is one area of particularly alarming growth and has already led to a number of lenders altering their strategies. Stealing client information, defrauding clients out of money and replicating their details have all grown in number over recent years, and it would seem that the practices undertaken have continued to thwart the lenders in question, despite almost continuous improvements to their strategies.
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Although there is always going to be an element of crime within most, if not all organisations, the mortgage market has tried hard to ‘batten down the hatches’ in an effort to clean the industry. The introduction of FSA regulation in October 2004 did much to improve the image and reputation of a market that many consumers viewed as shady and underhand. The regulatory train has continued with ever increasing announcements for the FSA and Brussels which raised the profile of the once ‘suspect’ industry and helped to rid it of the cowboys that once dominated the sector.
Although a few remain, it is testament to the impact of regulation that many have left, or being forcibly removed from the market.
Minimising the risks
However, despite concerted attempts by lenders, brokers, trade organisations and regulators to improve the stability of the sector, and reduce the propensity or possibility of financial crime, James Cotton, mortgage specialist at London & Country, admitted financial crime was still a concern for brokers. He said: “The market is worried about financial crime. However much effort people put into getting rid of it, it will always be a part of the market. The only thing that firms can do is to try and minimise the risks. The penalties for being involved are pretty severe, even if the broker is unaware.”
He added: “Brokers should heed the FSA non-conforming review. It is clear that question marks remain over the self-cert sector and the level of record-keeping. It said that over 50 per cent of self-cert cases failed to show why a self-cert offer had been recommended.
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Brokers need to be vigilant to potential fraud and they should check if they have any concerns or doubts about any aspect of the application.”
Like it or not, dealing with financial crime is a part of the market, and all you can do is minimise the risks. The FSA taskforce should help, but will fall far short of stopping financial crime in its tracks.
