High End Property Prices Kept Up By Mortgage Fraud

At the weekend I heard a report on Radio 4 that the National Crime Agency (NCA) had reported that property prices on more expensive homes was being kept artificially high as a result of mortgage fraud involving overseas firms and individuals. Unfortunately since then  I haven't been able to find anything on the web to support this. However it does raise an important point in the mortgage brokers exposure to financial crime. Mortgage fraud covers the whole range of the mortgage market from impoverished-looking first time buyers through to the high net worth client.

For those firms who deal with high net worth clients ( and I don't mean high net with by MCOB definitions, I simply mean clients who are better heeled than most) there is an additional level of vigilance required.

Often the high net worth client can have a bewildering collection of  income sources and income types as well as a complex array of assets. Even if the facts as presented to you are genuine, you will need to pick your way carefully through them to identify what is good income that is acceptable to the lender and what is not acceptable. Even more reason therefore to be on the alert for potentially fraudulent income.

Another important factor to consider and guard against is the source of funds that are going into the purchase. Many high net worth mortgages will be lower loan to value and this means that large tranches of money will be  put down by the client. Where has it come from? The lender is certainly going to want to know  (and if they don't, they should). Even if they don't want to know, you should. If you process a fraudulent transaction you could be  prosecuted.

The issue doesn't only apply to  purchases. Re-mortgages, especially where there is capital raising could be  seen as an opportunity to get funds back out of the property. Such funds may have been invested there several years ago when their was less  focus on financial crime by brokers, lenders and regulators. Just recall for a moment the amount of checks you carried out against financial crime and source of funds back in say 2005?

What do you do if you spot or suspect something? If you do nothing else SAR it.

Mortgage Fraudster Loses Properties

In an attempt to widen the scope of items posted in this blog, I would like to draw your attention to the case of a mortgage broker operating in North London who was convicted of mortgage fraud. The reason for blogging this here is to offer a warning about introducers in particular but also to point out the kind of frauds that are taking place in the market.

This broker was accused and convicted of mortgage fraud. He helped several clients obtain mortgages  by providing false  employment details and the usual documents and he also created several different false identities  including bank accounts in order to acquire properties totalling about £4 million  in the North London area in his own right,

The article here provides the facts as published by the NCA, including the addresses of the properties seized by the authorities. There are a number of articles out there about it in the media.

What learning can we take from this?

There are two points really. Firstly, that there is fraud out there and it takes on many forms. If someone contacts your firm with a view to introduce business to you, you need to be  extra careful.  No longer is it just a case of getting an introducer agreement signed, you need to carry out significant due diligence on the individuals and firms involved. Obvious BUT NOT EXHAUSTIVE matters include whether they have ever  been FSA or FCA authorised and if so whether they have ever had any matters of disciplinary enforcement or have been struck off. Don't just take their word for it, check on the Financial Services Register. Are they really who they say they are? There is a focus on knowing your customer but it needs to be  translated to knowing where your business is coming from and who is involved in it along the way. Have they ever had or do they currently have any active any financial issues? Bankruptcy, IVA , Financial Servic es industry debts or  general credit issues tend to focus the mind and may give rise to opportunist views on business generation ( i.e. fraud). I have a standard form for due diligence on individuals  who want to be  introducers if you want to contact me.

The second point is to point out how committed fraudsters can be. This chap has a number of aliases including active bank accounts in the names of people who were not him. He must also have had fraudulent passports. There is big money in fraud and  this means that it is worth investing the time to make the fraud more plausible. Be vigilant!

Finally, if you suspect fraud, don't forget to SAR.

Addendum to CR008 (The previous Blog)

I have been asked whether a nil return can be  provided if you have already reported a domain name.

My reading of the rules says that this is not correct.

The requirement is as follows:-

CCR008 Credit broking websites 

For each domain name used or owned by the firm during the reporting period:

Thus you are required to report even if they remain the same as last time.

Current Consumer Credit Reporting

Many firms are getting an email from the FCA at the moment telling them that they have a new report to complete on GABRIEL. This is the quarterly report on domain names required under Consumer Credit Rules.

It is fairly straightforward. There are three boxes in the return,

Left: to record the domain name in the format  http://www.domainname.whatever
Middle: to record the date of acquisition of the domain name if it was during the period of the report
Right: to record the date of disposal of the domain name if it was during the period of the report

The period of the report is recorded a bit above the line of these boxes .

If you have more than one domain name you can add extra by clicking on the Add box and then you repeat for the rest.

If you have had the domain name for ages ( then all you will record isthe full domain name in the box on the left.

I have to confess my understanding was that you only had to report a domain name if you charged a fee but i have seen two firms notified where no fee is charged and there is no option to specify that no fee is charged.

What you should do :-


Safest option is to log into GABRIEL ( username and password NOT email address and password as this is not the CONNECT system) and check that you don't have  a return waiting. if you have  one, complete it before the deadline even if you don't charge a fee. The deadline for completion I believe is 11th August 2015 but don't take my word for that.

The fine system of £250 applies as far as I am aware for non completion.