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Fraud and money-laundering checks are not many brokers favourite part of the job, but these checks are compulsory. The FCA is cracking down on money-laundering and brokers need to ensure they are doing their part to prevent it.
Not only is it a moral and regulatory obligation for brokers to stop illicit funds from being ‘washed’ through the purchase of a property, but it is also important for a broker’s career.
Lenders can get frustrated with a broker if they pass on business that proves to be fraudulent. This frustration can become an issue for brokers, as it is not uncommon for a lender to ‘blacklist’ a broker if they pass on too many cases that are proven to be dishonest. This could cause major issues for a broker, particularly if this is one of the larger lenders.
Even if the broker was in no-way attempting to deceive, this may still not be acceptable for lenders. They may be forgiving once or twice, but if too many fraudulent cases are passed on, they will deem that the broker is not doing enough due diligence.
This is a particular danger at the moment as fraudulent cases are at a record high. According to fraud prevention solution, Point Predictive, lender reports of falsified proof of income increased over 100% following the lockdowns. With no face-to-face contact in a lot of transactions, the danger of identity fraud has also increased.
The use of digital documents and selfies has created opportunities for fraud. Even those with rudimentary photo editing skills can make realistic forgeries of identity, bank statements or payslips. An expert may struggle to distinguish these from legitimate documents, so it’s fair to assume brokers may also be unable to ascertain the validity of them.
What can brokers do to ensure they don’t get blacklisted?
To prevent getting blacklisted, it helps if brokers work within a mortgage firm that provides compliance support. Just Mortgages partners with the Openwork network, so our brokers – both employed and self-employed - have access to regulatory advice to ensure they are doing everything they can to avoid passing on fraudulent cases.
Brokers can be completely cut off from a lender if blacklisted. The lender can act as judge and jury as they make the final decision on whether to work with a broker. However, a mortgage broker firm can appeal on a broker’s behalf if they do get blacklisted. If the broker firm can show the process and compliance checks in place, the lender is much more likely to be forgiving.
With brokers currently rushed off their feet with record levels of business, it can be difficult to find the time to scrutinise every passport, payslip and bank statement. But with increasing levels of fraud, brokers have to be wary of passing on clients who turn out to be deceitful. By working with a firm, brokers can reduce the time spent on compliance, and spend more time advising.
Originally published in Mortgage Introducer June 2021.