Broker banned over failure to spot fraud

Yuan Phoon

March 21, 2012

The FSA found Lafrance, a director at General Finance Centre from 31 October 2004 to 19 December 2008, was unable to meet the minimum regulatory standards in terms of competence and capability.

It found that Lafrance failed to ensure that GFC had adequate systems, controls and processes, in place and as a result, GFC was used as a vehicle for financial crime.

Lafrance had also failed in his responsibility as operations director by failing to identify indicators of potential mortgage fraud in cases with which he was closely involved and he failed to ensure that GFC staff in his department were carrying out appropriate checks to identify and resolve discrepancies in the information provided by customers.

Additionally, the regulator found that Lafrance has (and continues to have) an inadequate understanding of, and ability to comply with, regulatory requirements and standards.

In a final notice published on the FSA website, the regulator referred to several cases of fraudulent mortgage applications where customers claimed to earn far more than they actually did.

One of the referred cases involved a borrower submitting a form stating his income as £33,000 per annum. This application form was a GFC document used internally to record the personal and financial circumstances of the customer.

GFC then submitted a mortgage application for the borrower to a lender a month later with the income recorded on that application as £73,000 per annum, over double the amount of income that the borrower had declared.

The bank statements for the borrower on GFC’s customer file were inconsistent with a salary of £73,000 per annum. The income was also substantially higher than the income declared to HMRC.

Lafrance’s close involvement with the file was indicated by correspondence, compliment slips signed by him and the fact that his name appeared on the top of the emails that were printed on file.

Despite being closely involved with the file, Lafrance failed to identify the difference in the borrower’s salary. The fact that no other member of GFC staff identified and sought to clarify this discrepancy before sending the application to the lender demonstrated that GFC staff were not conducting appropriate checks on customer files.

The FSA cites four other cases in their notice which demonstrated that Lafrance did not meet minimum regulatory standards of competence.

Due to his lack of competence and capability, the FSA has exercised its powers to make a Prohibition Order against Lafrance.

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