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FCA: ‘We hold lenders responsible for weak fraud controls’


FCA: ‘We hold lenders responsible for weak fraud controls’

The Financial Conduct Authority (FCA) has told Loan Talk it expects lenders to help it win the fight against financial crime.

In November last year, the regulator reported that 124 firms had been cloned by fraudsters in the 12 months up to the end of August 2015.

In recent weeks, firms such as Fluent Money and Freedom Finance have partnered with fraud prevention services to try to reduce the amount of fraudulent applications which make their way to lenders.

The FCA, meanwhile, says it works closely with firms to combat mortgage fraud through its Information from Lenders (IFL) scheme.

“Using our IFL reporting forms, lenders can tell us about intermediaries they suspect of being involved in mortgage fraud.

“The scheme is voluntary, but we expect lenders to help us win the fight against financial crime.

“The IFL scheme helps firm[s] and others in the industry fight fraud, reduces the chance of a firm being used to commit financial crime or facing a loss because of it.”

The FCA added that it expected lenders to have robust and proportionate resources, systems and controls in place to detect and prevent mortgage fraud as fraud detection and prevention should be a key part of their businesses.

The regulator also expected senior management to be responsible for managing fraud risks, overseeing, owning and regularly reviewing the effectiveness of its control framework.

Speaking about ways the industry is trying to tackle fraud, Rob Derry, Managing Director at Brunel Mortgages & Loans, said: “There are lots of measures in place such as the e-ID, pre-completion telephone calls, certification of documents and the availability of independent legal advice.

“The implementation of advised sales also helps reduce fraud.”

Tim Wheeldon, COO of Fluent Money, said it was difficult to quantify how well the industry was coping with preventing fraudulent applications.

“Our experience is that there will be always be a minority of individuals who make fraudulent applications and much of the time we can spot the more obvious attempts, but we are talking about a minority.”

On what improvements he would like to see to help prevent fraudulent applications, Tim added: “As a distributor, we see the original documents to prove identity and verify them for lenders, who then get certified copies.

“It is therefore, in our opinion, important that the industry follows our lead to put in place extra protection for our lenders.

“As an industry, we also need to do more to share intelligence on incidents of fraud which would help all of us to do a better job.”

Nicola Mooney, Head of Secured, Intermediary and Business Finance at Freedom for Intermediaries, felt that identifying fraudulent applicants played a key part to ensure legitimate borrowers could access the best options available to them.

“As an industry, it is important that we are vigilant of fraudulent applicants such as false documents or failures to declare vital financial information as this can mislead and hinder the processes which lenders go through to match genuine borrowers with credit.” 

The FCA concluded: “Fraudsters and rogue intermediaries use their experience and knowledge of the market, plus loop holes, differing lending criteria, and checks and balances in the underwriting process.

“We hold lenders responsible for weak fraud controls and will forcefully pursue any poor systems and controls by supervising more intensively and using enforcement action where appropriate.”





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