Advances in information systems and technology have paved the
way for businesses worldwide to streamline their information
storage and sharing capabilities. Productivity has increased as a
result and business processes are more timely and economical than
The transition from paper to cloud has created a new arena for
fraudsters to orchestrate even more sophisticated fraud tactics and
mortgages are no exception. Key stakeholders including legal
practitioners, conveyancers, mortgagees, mortgagors, valuers and
brokers need to ensure that they remain alive to both the old and
the new fraud tricks.
This article discusses current fraud tactics within the realm of
the mortgage industry and provides useful risk management practices
stakeholders can adopt in order to minimise their exposure to
Why are they doing it?
Some of the reasons mortgage fraud is on the rise include:
They can – While technology has plenty
of scope to improve efficiencies, it also aids fraudsters to
perpetrate their scams quicker and easier, from basically anywhere
in the world with an extra level of anonymity.
They can't afford it – You don't
have to look past Sydney and Melbourne to see that the housing
market is priced beyond the limit of many income earners'
financial capacity. With house price increases set to continue
exceeding salary increases, people hold genuine concerns that if
they don't enter the property market now, they never will.
It's worth it – The perception that
penalties for white collar crime are lenient and seemingly
"worth the risk". In July 2015 a Sydney mortgage broker
was sentenced to just 350 hours of community service on 3 charges
of making false statements, making false documents and using false
documents to secure home loans totalling approximately $7
How are they doing it?
Fraudsters are not only cunning but also incredibly
sophisticated and technically savvy. In order to perpetrate their
scams, fraudsters routinely:
Create a false online presence – going
so far as to create fake websites, emails, telephone and mobile
details and social media accounts;
Create fake identities – often targeting
family members, people that are overseas, the elderly, the
vulnerable and even doppelgangers;
Doctor false documents including bank
statements, tax returns, utility bills, contracts, certificates of
title, passports, licences and bank cheques. Only last month a NSW
man allegedly swindled $460,000 from a bank using two bogus pay
Doctor false application forms –
overstating their income and assets and understating their
expenditure and liabilities, proving false employment particulars
and falsely alleging that they have genuine savings;
Obtain assistance from key stakeholders
– including valuers, brokers, legal practitioners and
How can you protect yourself?
The key is to create a climate and culture within your working
environment that places a premium on systems and procedures with an
emphasis on quality control and due diligence.
Always err on the side of caution;
Perform your own independent credit and title checks. Ask an
uninvolved colleague to review the file;
Be alive to false pressure and urgency tactics. Unmask the
reason for the urgency and then carry out due diligence on the
reason provided. Unless a Notice to Complete has issued, it is
unlikely that a super-urgent settlement is genuinely required.
Never take applications on their face value. Pick up the phone
and carry out proper due diligence including independent
verification of contact; employment and security details;
Obtain proper identification from all parties including the
mortgagors, borrowers and guarantors. We recommend adopting the
policy set out in the NSW Land Titles Office, Land & Property
Information Circular which was released on 9 November 2015.
Perform due diligence as close to settlement as possible;
Insist on receiving original copies of security documentation
or, at the very least, an undertaking from a solicitor that they
hold the original documents and will courier or express post the
originals as close as possible to settlement;
Invest in sound software, systems and procedures and staff
Never hesitate to ask the other party to confirm something in
Last but not least, obtain appropriate professional indemnity
insurance and have a sensible asset protection strategy in
Two criminal offences relating to "false dealing with accounting documents" have been introduced into the Criminal Code.
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