As the mortgage industry continues to untangle a major fraud crisis, data has revealed a surprising trend: third-party fraud actually declined over the past year.
The mortgage industry is in the grips of a major fraud crisis. Lenders, aggregators, and brokerages are currently working closely with regulators and law enforcement to track down how more than $3 billion of loan fraud may have slipped through the cracks. The concerns largely focus on organised crime – and how fraudulent loans may have potentially helped criminals defraud lending institutions of billions of dollars and been used to ‘wash’ the proceeds of crime.
Over the past five months, progress has been made in finding and charging those who have allegedly been involved with the largest instance of organised mortgage fraud in recent history. Arrests have been made, bankers have been fired, brokers have been disaccredited, and more work is ongoing as regulators continue to unpick the Gordian knot of who has been responsible for the alleged crimes, which span car financing, personal lending, and mortgages.
But while many of the headlines have zeroed in on fraud in the broking industry, Equifax data has revealed that the third-party channel was responsible for a tiny proportion of suspected fraud in 2025.
Further, the proportion of fraud believed to have originated through the third-party channel has actually been falling.
The findings come in the Equifax Fraud Index Report – 2025 year in review report, which has revealed that while the volume of credit fraud increased by 11.1 per cent in 2025, it was increasingly being committed by applicants themselves.
Equifax has noted a shift toward more individuals committing first-party fraud, which was up 25.5 per cent year on year, and accounted for 31.6 per cent of all listings in 2025 – up from 26.2 per cent in 2024.
In fact, third-party fraud (whereby intermediaries such as brokers, accountants, and car dealers may falsify documentation or fabricate information to influence credit decisions) saw a slight decline in 2025, according to Equifax, representing just 2.9 per cent of listings, down from 3.2 per cent in 2024.
Third-party fraud listings actually dropped by 4.6 per cent last year, reversing the growth trend identified in 2024 (when listings from the third-party channel increased 16.0 per cent), according to the Equifax report.
Economic conditions pushing more people towards fraud
Speaking to The Adviser, Tehani Legeay, general manager of digital identity and fraud services at Equifax, noted that while fraud is being flagged in all channels, more applicants appear to be perpetrating fraud directly.
The primary driver of this was a 14.3 per cent uptick in false document credit listings, particularly for mortgages, personal loans, and car loans.
Equifax noted that there was “a move away from identity theft toward identity manipulation, as the ease of using GenAI for first-party fraud likely reduces the need for external criminal assistance, potentially accounting for the decline in third-party fraud)”.
Legeay elaborated: “As economic conditions bite, people are more motivated to potentially perpetrate fraud themselves, and then – if you combine that with ready access to technology (specifically AI) to fake documents (which is one of our highest sort of methods in first-party fraud), I think it is becoming readily accessible to the average person to commit fraud...
“And they are becoming more motivated to do that as economic conditions bite. So, it’s both that technology and the economic conditions driving that. And that’s been a really big change in what that fraud landscape looks like.”
According to Legeay, the documents that are being manipulated through AI include identification documents and payslips/proof of income.
“Where the application has its weakest link is in that false documentation, because it’s now so easy to generate something with AI,” she said.
However, fraudsters are also deploying AI to craft synthetic identities using “Frankenstein profiles”, combining real and stolen data to circumvent traditional know your customer (KYC) checks, often further amplified by the use of deepfake audio and video to impersonate trusted individuals or officials in real time.
The general manager of digital identity and fraud services said it was “seriously concerning” that borrowers were now “willing, able, and motivated” to submit fraudulent loan applications using “really sophisticated technology” that can look legitimate to both lenders and brokers alike.
“I would imagine that would be concerning for the vast, overwhelming majority of brokers who are doing the right thing,” she said.
Legeay recommended that both brokers and lenders look to engage “multiple layers” of fraud prevention checks for verifying documentation and their clientele, including:
- “Zeroing in on documentation”.
- Verifying documentation against “source data” (such as open banking data).
- Searching known databases of application fraud (such as the Known Fraud Exchange, although this is not currently open to the broker channel).
- Sharing information via industry fraud prevention groups.
- Employing “quiet checks”, including biometric checks and the language of the keyboard being used/device checks.
“Unfortunately, to combat one application fraud, it is important to have multiple layers of fraud prevention, rather than relying on one alone,” the general manager of digital identity and fraud services at Equifax said.
“It might feel like you’re investing a lot, but – from what we’ve seen – the damage from one fraudulent application can completely undermine someone’s reputation and business.”
AI fraud a growing concern
The surge in document manipulation comes as Australia’s financial crime watchdog, AUSTRAC, sounds a fresh alarm over AI-enabled money laundering.
AUSTRAC CEO Brendan Thomas last week warned that criminals are increasingly weaponising AI at scale to fabricate identities, forge documentation, and rapidly disguise the proceeds of crime within routine transactions.
He said AUSTRAC expects AI to significantly increase the efficiency of identity fraud, fake documents, and impersonation techniques used to access both financial and non‑financial systems.
Thomas framed the refreshed analysis as a foundation for the next phase of regulatory change.
“This is about building a system that’s fit for today’s risks and tomorrow’s threats – one that supports risk management, delivers better intelligence and keeps Australia aligned with global best practice,” he said.
In response to these converging threats, lenders are moving quickly to replace manual verification techniques with automated, multi-layered defences. Non‑bank lender RedZed recently announced a partnership with Australian technology firm Fortiro to strengthen income verification and fraud detection in its lending process.
According to RedZed, the new capability would support automated extraction of income data, real‑time fraud screening, and discrepancy checks at the point of document submission.
RedZed framed the move as a response to growing expectations for faster credit decisions alongside heightened concern about document manipulation enabled by AI.
[Related: How do aggregators track broker compliance?]
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