AUSTRAC 'uncovers coordinated mortgage fraud and systemic weaknesses across Australia’s lending sector' as NZ regulators spend more time on mortgage fraud cases

AUSTRAC, Australia's anti-money laundering, countering terrorist financing regulator and financial intelligence unit, says it has identified potentially hundreds of millions of dollars worth of suspected fraudulent loans, with most linked to Sydney properties. 

AUSTRAC says the uncovering of "coordinated mortgage fraud and systemic weaknesses across Australia’s lending sector" comes from its Fintel Alliance, and working with Australian banks, the Australian Taxation Office, NSW Police Force, NSW Crime Commission, Australian Criminal Intelligence Commission, the Australian Prudential Regulation Authority and Australian Securities and Investments Commission (ASIC) through Operation Claw. 

"A joint analysis of data from 10 major Australian banks identified potentially hundreds of millions of dollars in suspected fraudulent loans, mostly linked to properties in Sydney," AUSTRAC says.

"Operation Claw identified suspected mortgage fraud involving inflated incomes, misrepresented employment and fabricated or unverifiable business activity used to support loan applications. The project identified cases where offshore or third-party funds were used to complete property settlements and make mortgage repayments, demonstrating how false income streams and complex funding arrangements can facilitate access to the Australian property market." 

"The activity was not confined to one lender or borrower group. Recurring warning signs across participating banks included falsified or misleading documents and the repeated use of mortgage brokers, accountants and law firms across multiple loan applications," says AUSTRAC.

The Australian Financial Review reported AUSTRAC had found some instances where ineligible borrowers were trying to move money into Australia from China through illegitimate means.

In NZ mortgage fraud is a growing issue for the SFO & FMA

Here in New Zealand the Serious Fraud Office last week asked for help from the public to identify three people it says may be able to help with enquiries into a criminal syndicate that allegedly worked together to fraudulently obtain nearly $5 million in mortgages. And the Financial Markets Authority has reported a rise in mortgage fraud cases, with mortgage fraud now a key area of focus for the regulator.

AUSTRAC says names of individuals and entities potentially involved in submission of false documents to support loan applications have been given to law enforcement and regulatory agencies, including ASIC, the Australian Taxation Office and Tax Practitioners Board, for intelligence purposes. 

Additionally it says banks have used intelligence from Operation Claw to identify potentially fraudulent loans, investigate suspicious activity, strengthen controls and make further referrals to authorities. Some banking relationships have been ended, and further action is expected, AUSTRAC says.

'A wake-up call for every lender'

AUSTRAC CEO Brendan Thomas the scale of the activity in Australia should be a wake-up call for every lender.

"The same warning signs were found across banks that together cover the vast majority of Australia's mortgage market," Thomas says. "While this project did not identify evidence of widespread money laundering, the weaknesses it exposed could be exploited by criminals seeking to abuse Australia's financial system."

Thomas says all lenders should look closely at AUSTRAC's findings and ask whether the same vulnerabilities exist in their business.

"The most effective way to stop mortgage fraud is before a loan is approved. Once a loan is established and the funds have moved, recovering the money becomes significantly harder. Lenders need to actively look for these warning signs, strengthen their controls and report suspicious activity to AUSTRAC. This is not something any institution can afford to ignore," says Thomas.