A quick scan of the news headlines and guaranteed there will be at least one story relating to fraud. Large or small scale, every case adds up, making fraud a national issue of increasing importance. As a result of the economic downturn and significant growth in the short term finance market, the bridging sector is more susceptible than ever.
Any association with fraud is bad for business. As well as the obvious financial losses and the time it takes to resolve, the potential damage to your reputation could be devastating. So who does it affect most and what is the best way for the industry to tackle it?
Often the news headlines focus on brokers but this paints an unfair picture – it affects every part of our industry, including lenders, valuers and solicitors. The Solicitors Regulation Authority recently revealed that there are 770 open claims relating to mortgage fraud against the Solicitors Compensation Fund.
No part of the financial services sector is immune but there are plenty of measures that we can take to protect ourselves:
Early warning signs: if the purpose for the loan is vague or there are inconsistencies in an application, beware. Be on the lookout for elusive applicants – providing an overseas address, never meeting you in person, providing only a mobile telephone number or being reluctant to provide proof of identity.
General can checks also play an important role – the internet has made the world more transparent and a lot of useful information can be gleaned from Google.
In the wider context of solicitors and values, check their licence and indemnity cover. Membership of the appropriate trade associations is a good indication of a legitimate trustworthy business.
Standard Procedures: systematic checks are the most obvious way to detect fraud, from anti money laundering to credit reference checks.
Identity fraud seems to be the most common issue at the moment so rock solid proof of identity is vital. We have come across cases where an applicant attempts to raise capital on an unencumbered property, not legally owned by them.
Regulation: regulation is on the horizon and there is an argument that it could help raise the standard of fraud prevention across the industry. However, good business practices and strict internal procedures should be enough.
Training: staff should be trained to spot fraud. With good training, they are the gatekeepers to your business and I was pleased to see that the NACFB has announced the launch of some fraud-related training programmes.
Industry measures: the industry is increasingly working together and collectively they have put together a number of joint measures, such as information sharing. The Association of Short Term Lenders (ASTL) has a database which captures details of potential issues with valuers, borrowers and brokers.
As fraudsters become more sophisticated, the challenge for our industry is to stay one step ahead. At Bridging Finance Solutions we are fortunate to have a lot of loyal customers and repeat business so the vast majority of our business comes from existing customers or through recommendation.
However, it is important not to be complacent so as we head into 2012, one of our New Year Resolutions will definitely be to be more vigilant than ever about fraud.