Fraud: FSA information from lenders scheme and supervisory action

This page contains information on the following:

• The FSA information from lenders scheme
• The reporting criteria
• Suspected fraud
• Contact details
• Outcomes of the scheme to date and next steps

The FSA information from lenders scheme

The FSA information from lenders scheme (IFL) was launched following discussions with the CML in April 2006. It provides a process in which lenders can report, on a voluntary basis, cases of proven or suspected mortgage fraud where there is strong suspicion of intermediary involvement.

The aim of the initiative is to gain a greater understanding of such fraud, to gain a better sense of its extent, and to tackle reported cases more effectively. The CML financial crime panel has been in discussion with the FSA about the initiative and is supportive.

The FSA asks that as many firms as possible report, on a voluntary basis, cases of proven or suspected mortgage fraud where there is strong suspicion of intermediary involvement. The specific reporting criteria, which are set out below, have been considered with care, in order to promote reasonable consistency as to what is or is not reported, and to ensure that the burden on participating firms is not excessive. A number of firms have indicated that they currently report such fraud to intermediaries on this basis.

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The reporting criteria

Following discussions with the CML financial crime panel, the FSA have set out the following reporting criteria:

They would like lenders to supply details of proven or suspected mortgage fraud where they have suspicion of broker involvement:

• Sufficient to have caused removal of that broker from their panel; or
• where they now refuse new business from an individual within a brokerage; or
• where subsequent investigation identifies fraud.

The FSA focus is on brokers:  they are not interested in cases of applicant fraud where there is no suspicion of broker involvement and the broker has not been removed from a lenders' panel.

The examples below are not exhaustive, and the FSA appreciates there will be other examples of fraud that result in a lender removing a broker from their panel.

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Suspected fraud

• Doubts over income and employment details. 
• Suspicious behaviour or trends occurring on completed accounts; for example, a broker whose completed cases have an unusual rate of suspicious arrears/repossessions, benefit claims or fraud complaints.
• Links with other applicants where fraud has not actually been proven, ie, shared addresses, accountants, purchases on same development, identical loan amounts, etc.
• Links between different mortgage applicants, ie, shared bank accounts, addresses, etc. 
• Applications cancelled when further information/verification is requested. 
• Suspected fraudulent documentation.
• One or more of the above in several cases from the same broker or other suspicious trends.

In terms of the level of information to supply the FSA would like a summary of the investigations the lender has carried out including:

• Name of broker. 
• Details of individuals involved at the broker. 
• Details of fraud and evidence. 
• Names of customers involved

The FSA may wish lenders to supply them with further evidence if a case is to be pursued; they will discuss as appropriate.  

All reports are acknowledged and treated as confidential. The FSA is keen to feed general lessons learned, back to the industry as appropriate. Both the FSA and CML encourage as many firms as possible to take part in this voluntary exercise, which will provide valuable data as well as offering opportunities to pursue cases of intermediary fraud in a more concerted and joined up manner.

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Contact details

If you have any information you wish to submit to the FSA please send it to the dedicated mailbox at ifl@fsa.go.uk. 

If you have any queries about the scheme, please contact:Russell.Shotton@fsa.gov.uk

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Outcomes of the scheme to date and next steps

The FSA has launched a webpage highlighting recent action taken against brokers and the reoccurring themes from the cases they have investigated to date.

To date over 30 lenders have submitted in excess of 300 reports to the FSA. From this intelligence more than 60 cases have been referred for enforcement action, which has resulted in a number of brokers either having the authorisation suspended or withdrawn.

The FSA has sent an open letter to the CML stating that they have reviewed the scheme and have answered the concerns of lenders that have, until now, acted as a barrier for broader lender engagement.

The open letter also stresses the importance of the information received through the IFL to their overall strategy to combat mortgage fraud and in illustrating a lender's readiness to confront fraud.

The FSA has expanded the scheme to enable brokers to report cases of fraud and suspected fraud.

Further information on the updates to the scheme are available in the members' section of this webpage.

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