Fraud is a pressing and ever-growing concern in the bridging finance sector. As fraudsters develop more sophisticated means to commit crimes, fraud awareness becomes increasingly crucial for businesses. Technology is moving at a fast pace with increased online activity throughout the industry, so bridging loan companies must employ a more robust and savvy approach to prevent fraud. Indeed we are increasingly working together and collectively there are a number of joint measures including anti-fraud networks for information sharing.
One particularly high-risk area for bridging loan companies is when an applicant attempts to raise capital on an unencumbered property which is not legally owned by them. In certain scenarios, additional checks are required to confirm the original property purchases.
The following groundbreaking identity fraud cases related to frauds against unencumbered properties where there were discrepancies with the address of the purported owner of the property.
- Dreamvar (UK) Ltd v Mishcon de Reya [2018] EWCA Civ 1082
- P&P Property Ltd v Owen White & Catlin LLP
Both cases could have been prevented if further due diligence had been carried out. The industry has without a doubt taken notice of both cases and they keep us focused and vigilant.
Bridging Finance Solutions utilise a number of measures to prevent fraud. We carry out rigorous underwriting and identity checks on all clients and use a panel of selected valuers and professionals for any specialist advice and reporting. Undoubtedly, the biggest risk in short term lending is identity fraud. Proof of identity and anti-money laundering due diligence are essential prior to completion.
Rachel Davies, Head of Underwriting at BFS explains, “Speed is one of the main areas where we excel but that is often a tactic fraudsters use to pressurise a lender to complete. It’s vital therefore to meet and get to know the client to support automated AML checks. Lenders and lawyers should not shy away from asking further questions if something just doesn’t add up. We are members of a number of financial associations where lenders share knowledge and best practices so we can continue to combat fraud.”.
