Compliance Tip – It’s time to crack down on loan fraud!

November 13th, 2017

Fraud is a major concern for everyone in Australia’s finance industry, but particularly for lenders and mortgage brokers, as industry regulators are increasingly turning the focus on us.

According to the 2016 Veda Cybercrime and Fraud Report, there is an ongoing, 27% year-on-year increase in falsifying personal information! One of the reasons for this is advancements in technology, including PDF writers and graphic design software, which have facilitated the production and submission of high quality, non-genuine documentation.

Falsified documentation – particularly documents that verify a customer’s income – is the most common type of fraud that a mortgage broker is likely to encounter.

How does this affect us?

It is your responsibility to ensure the income declared on a customer’s loan application truly reflects their actual income. That puts you on the front line in terms of mortgage fraud prevention!

Since 2010, ASIC has investigated more than 100 matters relating to loan fraud and banned, suspended, or placed conditions on the licenses of over 80 individuals or companies. We can only expect this scrutiny to intensify. Quite recently, one mortgage broker was actually jailed for 5 years for colluding with clients over fraudulent loan applications.

How can you crack down on income fraud?

The way we check income and verify living expenses is by studying payslips and bank transaction statements. You should check carefully to ensure that these documents, particularly the payslip, contain the information you would reasonably expect to see – and make an effort to check the documents have not been altered or doctored.

Pay slips have to cover details for an employee’s pay for each pay period. Here’s what should appear on a payslip:

• Employer’s and employee’s name
• Employer’s Australian Business Number (If applicable. Verify by looking it up online.)
• Pay period
• Date of payment
• Gross and net pay
• Hourly rates and amount paid
• Any allowances or bonuses
• Superannuation deductions
• Any other deductions (such as child support payments, or HECS payments)
• Leave balances
• A year to date summary.

If you are in any doubt, it is a good idea to ask your customer’s permission to call their employer and verify the information in their payslip. If they refuse to give you permission, this can be considered a red flag.

Talk to your customer and make notes

Customers who are not telling the truth will often reveal themselves in the course of ordinary conversation. Having a good understanding of the pay associated with your client’s job title, responsibilities and employment industry, will help you to make an assessment about whether or not they are being truthful about the income they receive. Making detailed notes during your conversations, and comparing them to the documentation provided, could trigger the need to upscale your enquiries.

Resources such as ASIC’s MoneySmart income calculator and Glassdoor can help you assess whether the pay is right for the role your customer performs. Don’t be afraid to request further documentation if required. Listen to your intuition – does it make sense and sound right?

Remember, evidence is the key to protecting yourself. Always file your notes and any documentation in Mercury for future reference if required. For support or advice on verifying your customer’s income, don’t hesitate to ask the Compliance Team. Simply click your help icon in Mercury to get in touch with us on the Helpdesk, we’re happy to help.