Shut the Door on Fraud PDF - A Practical Guide

Keeping your business safe A PRACTICAL GUIDE Financial crime represents a serious risk to anyone arranging finance for members of the public or businesses, and fraudsters are highly competent, clever and plausible when making their approach. The trick is to spot the warning signs early, so that th...

Keeping your business safe A PRACTICAL GUIDE Financial crime represents a serious risk to anyone arranging finance for members of the public or businesses, and fraudsters are highly competent, clever and plausible when making their approach. The trick is to spot the warning signs early, so that this doesn’t have a significant impact upon your business. The following guide contains key categories with tips to help you spot potential fraud issues with clients early in your processes and in plenty of time to stop any damaging effects. Many are quick and easy checks you can undertake to ensure you are confident in processing applications on behalf of new and existing clients, and if followed, will help leave you in a position of strength. INCOME EMPLOYMENT 1 Overstated income Falsely inflating earnings on an application. 1 Does the employer exist – broker’s local knowledge may help? Conduct simple additional web checks (Yell.com/ Google Streetview). 1 Undisclosed adverse credit Check credit and address history – non-disclosure of an address to hide defaults or County Court Judgements. 1 Impersonation Misusing another person’s identity to obtain a mortgage. 1 Property related Deliberate non-disclosure of a relationship between the purchaser and the vendor of a property. 1 Income documents Authenticity is key, check everything and do not accept photocopies. 1 False bank statements Check validity at all times. 1 Ensure income is not inflated. 1 Does the applicant’s income appear in line with employment type and applicants age? 1 Do bank statement credits match those on pay slips? 1 Does the month 12 pay slip or YTD figure look like it will match the P60? 1 Has income only gone up in last four months? (trend) 1 Do figures on P60/Pay slips/SA302’s all look correct? 1 Quality – are the payslips clear and legible? 1 Format – do they look genuine i.e. columns line up? 1 Are they the customer’s latest payslips? 1 Are there any missing payslips? 1 Are the details consistent – NI number, employers address and tax code? 1 Cash payment method – is this feasible considering the level of income and type of employer? 1 Do salary credits appear on bank statements and match the net income shown on the payslips (week to week or month on month)? 1 FPI payments (Faster Payments) on bank statements – when did the FPI credits commence going into the customer’s bank account? Are these genuine credits from the declared employer? Challenge any concerns and request additional payslips/bank statements from the customer. 1 Does the customer work for the declared employer? Has the customer provided a landline office number, if not then why not? Does the work contact number match the details advertised on the company website or directory listings? Attempt to call the customer at the declared employer. 1 Self-employed – manipulation/changing shareholding? 1 Consider commercial business searches – is the company listed with Companies House? 1 Business ownership status – consider implications of sole trader, partnership/family business. 1 Does the customer advertise locally and, if so, then how – local papers, internet, Yellow Pages or word of mouth? 1 Consider the nature of the self-employed business and how do the customers generate business? 1 Is the work seasonal – if so, are declared income figures reasonable? 1 Income figures reflected on SA302’s – cross reference income against other sources i.e. business bank statements. 1 Is the employer address or place of work considered suitable/feasible to applicants declared home address (especially on second jobs/income)? SCHEME ABUSE INTRODUCERS 1 Low salary, unaffordable as a residential. 1 Complete robust Introducer Agreement. 1 Approach Buy to Let applications with the same level of scrutiny as a regulated residential mortgage application. 1 Carry out robust Due Diligence (Google, Companies House, Credit Check, Social Media etc.). 1 Always ensure that a forwarding correspondence address is captured for the customer. Will the forwarding address be suitable accommodation for the customer’s needs i.e. is it a married couple with three dependants going to live in a two bed apartment? Are children going to be required to change schools? Ask questions as to the plans made and record responses. 1 Regularly visit your introducers to check processes and offer training where appropriate. 1 Hidden BTL – look out for large transfers, ensure all names and details match. 1 Buy to Let misuse – check Rightmove showed the current address to be on the market for sale. 1 The use of these tools all assist in the validation: Google Maps, Bing Maps (birds eye), English Heritage Map search, Rightmove, Zoopla. 1 Ensure you are checking: 1 the purchase price 1 Incentives 1 Refurbishments 1 Does it all add up? LET TO BUY 1 Let to Buy – is the situation plausible? i.e. why is the customer moving, where is the customer moving to, what is the commute time to work, does the transaction make sense? This detail must be captured within the customer fact find. Check property websites for evidence that the current residential address is being advertised for sale or let. 1 If a Let to Buy scenario occurs – are you arranging a mortgage for the new residential purchase? If not then why not? Request a copy of the customer’s mortgage offer relating to the new purchase for your file. 1 Has consent to let been obtained from the lender in advance? Many lenders will not accept this being done at the point of a new application. 1 Over inflating rent amounts, remember Google searches can show what is being advertised through the letting agents you should always check, the lenders will. 1 Check and confirm local reputation. 1 Educate and monitor expectations around provision of leads (no advice, type of info to collect). 1 Always verify clients and original documents yourself (do not allow your introducer to involve themselves in your sales process). 1 Plausibility of the introduction – for example, why is a southern based professional deciding to use a northern based mortgage broker via an introducer for their mortgage application? Possible higher fraud risk – increased checks and verification. DEPOSIT 1 For purchase transactions, mortgages generally require the applicant to provide a personal contribution in the form of a deposit to achieve the required purchase. 1 Is the deposit reasonable/plausible? Ensure you verify the source of deposit and plausibility i.e. young FTB with large deposit. 1 Scrutinise large deposits being provided – consider source of funds? 1 Retain evidence on file and reference within fact find documentation. 1 If gifted deposit, obtain letter from donor and bank statement confirmation to verify funds. 1 Ensure formal disclosure of any incentives being provided by the vendor or builder (if new build). The valuer will consider all incentives being offered as part of the transaction when conducting an assessment of the property value. DOCUMENT CHECK 1 P60 – Rounded total earnings e.g. £25,000.00 1 Bank statements – spelling errors, few outgoing transactions, balances which do not add up. 1 Check the number of pages shown on the bank statements pages 1 of 3, 2 of 3, 3 of 3. Pages photo copied as templates will not always run in order. 1 Non-disclosure of dependants yet bank statement info suggests otherwise. 1 Payslips – cumulative total incorrect. 1 Ensure that all mainstream mortgages are plausible reflecting the customer’s circumstances. 1 Do any third party professional documents (accountant’s letter, employer reference etc.) appear to be legitimate? (Google checks/Google Maps/ Companies House checks will assist). APPLICATION CHECK 1 Gaps in address history. 1 High income for a young applicant. LENDER VIEWS 1 Reluctance to produce requested documents, particularly to verify income or identity. 1 The vast majority of lenders share fraud and suspected fraud intelligence (Hunter system). 1 Change of solicitors close to completion/post offer. 1 Cancellation of application when documents are requested will not be viewed positively. Send documentation in regardless or explain fully to the lender. 1 As well as credit tools, lenders will also use fraud detection tools, which highlight inconsistencies in any data provided. 1 If an applicant has attempted to deceive one lender (recent searches) then it is highly likely that this will be shared across the industry. 1 If an application stalls (chain break, relationship breakdown etc.), inform/update the lender so that they can record this for the reasons in the previous point above. 1 Is the mortgage application on a current unencumbered property? If so, are you completely satisfied that you are dealing with the declared owner on the Land Registry? Check all ID and ask for original documents. 1 Lenders want to work with brokers to protect all innocent parties – Remember they would like you to be their first line of defence! 1 Sometimes it may be appropriate to ‘walk away’ from a deal if it does not feel right. This is ok – please do not risk your business for one case. Please note: This is only a guide and is not an exhaustive list, please ensure that any queries or concerns you may have regarding the protection of your company is discussed with both the Lender concerned and your compliance service provider. The SimplyBiz Group The John Smith’s Stadium, Stadium Way, Huddersfield HD1 6PG Tel: 01484 01484 439100 Email: [email protected]