EXCLUSIVE: FSA: Please report fraud suspicions

Sarah Davidson

November 22, 2011

John Hindle, acting smaller firms manager at the FSA, said reporting suspicion of fraud was “highly valuable” even if brokers had little factual evidence.

He said: “We take all fraud seriously, soft or hard, and as such we would encourage brokers to be reporting all those circumstances.

“We as investigators at the FSA very rarely get handed a well-proven case. It hardly ever happens. Investigations take a huge amount of work and we tend to start with the suspicion – it’s that kind of intelligence that is highly valuable to us.”

Transparent or negligent?

And Tom Spender, head of retail enforcement at the FSA, added: “It’s all about building up an intelligence profile.

“You might not have the full answer or the full case but if three or four people raise suspicions about one person that is logged at lenders, networks and with us. It builds a critical mass of suspicion that might trigger an investigation.”

Spender added that it was also far better for brokers to “self-report” than to find themselves caught up in suspected fraud where they might have been aware of a problem.

He said: “It’s much better for a broker to self-report a problem rather than for a problem to be identified to us by a lender and then we go searching.

“A lot of cases don’t proceed to a formal enforcement path and one of the reasons we take into account before deciding where we put our scare enforcement resources is whether the broker finally clicked, realised their involvement and reported it. We really take that into account and it’s very much in the favour of the broker.”

WHISTLE BLOWING

Robert Sinclair, director at AMI, said the industry had failed to help brokers think if they come clean in this type of scenario they would be safe from the authorities.

He said: “It’s that horrible feeling if you’re the broker and you get the fourth application through and then suddenly think things don’t look right. Do I keep my mouth shut, not take any more but hope I’ll get away with it or do I blow the whistle? And where does that leave me?

“Brokers don’t feel comfortable that they would be safe in that situation.”

But Hindle said: “So long as due diligence is followed with integrity then you could feel comfortable that you were doing the right thing by blowing the whistle we would expect brokers to blow the whistle in that scenario.”

Meanwhile Rob Killeen, director at London-based broker Capital Fortune, said reporting suspicions about other introducers was imperative to deter fraudsters.

He said: “If people think there has to be firm black and white evidence against them before they even get reported to the FSA then that’s the tip of the iceberg and will leave 99% of people’s behaviour unchanged.”

DOMESTIC VIOLENCE

Killeen, who practised as a barrister in London for 12 years prior to becoming a mortgage broker in 2005, said the reluctance to report suspected fraud reminded him of attitudes to domestic violence.

“In 2002 and 2003 the police wouldn’t make any arrests around domestic violence because if there was no firm evidence and she wasn’t black and blue then the police just weren’t interested.

“There was a huge campaign with lawyers that made sure police took those cases seriously. The result was police would get involved when there were just allegations that someone may be committing domestic violence behind closed doors.

“Mortgage fraud is very much a behind closed doors situation and brokers should be reporting sharp practices. Until we move away from that culture of acceptance, which I think we are but there’s a long way still to go, we’ll never eradicate fraud.”

WOOD FOR THE TREES

But Pat Bunton, director of operations and compliance at London & Country, raised concerns about the practicalities of reporting brokers without firm evidence.

He said: “If you are going to start saying this guy has done this wrong you need to be clear they have actually done something wrong.

“Otherwise we will just have chaos; if you suddenly ask brokers to report every suspicion they have it would be unstructured and you won’t see the wood for the trees.

“There also wouldn’t be enough resource to investigate all of those cases. But where you have clear evidence that something untoward has happened that certainly should be reported and the regulator should commit to investigating that as well.”

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