The FBAA has said that banks must dump their controversial referral and introducer models as scrutiny over mortgage fraud intensifies.
The Finance Brokers Association of Australia (FBAA) has demanded banks dismantle their introducer and referral programs and overhaul internal approval practices, as the industry grapples with revelations of large‑scale mortgage fraud.
On 27 February, mainstream media reported that the Commonwealth of Bank of Australia (CBA) had self-reported to the police and corporate regulators regarding potential mortgage fraud totalling an estimated $1 billion.
The concerns appear to be focused on money laundering – whereby criminals may be ‘washing’ money obtained through illegal means (for example, drug dealing, prostitution rackets, or modern slavery) by obtaining loans using doctored documents – in some cases, created by artificial intelligence (AI).
It was then suggested on Friday (10 April) that brokers within aggregation group Finsure may have been implicated in allegations relating to suspected mortgage fraud, with bankers suggesting ‘people within its network’ may be involved in fraudulent home loan applications.
The Australian Securities & Investments Commission (ASIC) told a parliamentary joint committee on 9 March that it was currently undertaking “compliance inquiries” with Australia’s largest lender in relation to the matter.
The Australian Transaction Reports and Analysis Centre (AUSTRAC) is also currently working with major banks, law enforcement, and other regulators to map the extent of increasingly complex loan fraud.
Interim FBAA CEO Peter White AM stressed that the association supported firm action against wrongdoing but warned against blanket attacks on the broking profession.
White underlined that the association would back robust enforcement against any individuals caught exploiting the system.
At the same time, he moved to shield the broader channel from reputational fallout.
“Our industry is not immune to bad actors, but equally we must not accept any attempt to tarnish the overall reputation of brokers who are overwhelmingly of excellent character and go above and beyond to serve our clients and support lenders with integrity,” White said.
Organised crime and data gaps under fire
White said emerging information suggested organised criminal groups sat at the heart of some of the most serious cases of suspected mortgage fraud.
He said that this elevated the issue beyond routine compliance failures and into a law‑enforcement challenge that required co-ordinated work by banks, regulators, and police.
“More information and data is needed to get the facts, and when this becomes available we will consider anything we can do as an industry body to play our part,” he said and signalled the FBAA’s willingness to engage in system‑wide reform.
‘Eliminate’ introducer and referral programs
According to The Australian Financial Review reports, the loans allegedly included “fake income statements” provided by “several accountants” to brokers and were written through both the broker channel and CBA’s controversial introducer program.
White turned the spotlight on lenders’ own distribution strategies, saying that some models had long been recognised as fertile ground for misconduct.
He said that inquiries such as the Sedgwick review and the Hayne royal commission criticised introducer arrangements and recommended tighter controls or their removal, particularly where unlicensed third parties received commissions for passing on leads.
“The FBAA has been calling out some banks for ignoring recommendations from the Sedgwick report and the Hayne royal commission for many years, sadly to no avail,” he said.
“It is accepted that referral and introducer programs can be misused, and now they should be eliminated,” White said, in a direct call for banks to shut down the schemes completely.
Other major banks have also faced scrutiny in this area, with NAB’s introducer program being examined during the banking royal commission, which resulted in the lender later paying $15 million in penalties.
ASIC also took enforcement action against ANZ over its introducer arrangements, resulting in a $10 million fine.
Questions over branch approvals and shared responsibility
Beyond referral programs, White raised concerns about inconsistencies between broker and branch decision making as banks respond to heightened fraud risks.
He questioned how some banks could sign off loans that had already been declined through the broker channel and hinted at potential gaps in internal controls.
White backed calls for an industry‑wide response but made clear that every segment would need to confront difficult changes if trust was to be rebuilt.
Emphasising the sector’s previous willingness to accept reforms after the royal commission, he said “the finance broking sector has proven that we are prepared to work in the interests of the industry as a whole, even when it may adversely affect us”.
He closed with a challenge to lenders and other stakeholders to match that stance as the fallout from the scandal continued.
“If others are also willing to make the tough decisions – and time will tell – we can combat the problem together,” he said.
MFAA CEO Anja Pannek previously told The Adviser that mortgage fraud was a serious matter but was not representative of the vast majority of participants in the lending ecosystem.
“It’s not a bank, broker or referrer only issue, it’s a whole-of-industry challenge that requires a co-ordinated response,” she said.
“While this activity represents a small part of the market, it has outsized consequences. That’s why stronger collaboration and information sharing across brokers, aggregators, lenders and regulators is critical.”
[Related: Major aggregator flagged in mortgage fraud probe]
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