Following mortgage fraud revelations, the corporate regulator has revealed it will review lenders’ controls over referrers, proprietary bankers, and brokers.
The Australian Securities and Investments Commission (ASIC) will review bank referrer programs, proprietary-lender incentives and lender oversight of mortgage brokers as part of its 2026–27 banking-sector supervisory agenda.
Expected to commence in the third quarter of the 2026–27 financial year, the review places the full mortgage-origination chain under scrutiny, from bank-employed lenders and third-party referrers to accredited broker channels and the controls lenders use to identify concerning lending patterns.
ASIC said it would examine whether recent changes in bank remuneration structures, the use of referrers and lender supervision of brokers were producing conduct or consumer-outcome risks.
“We will commence a review into various aspects of lender conduct. This is likely to focus on the impact of the short-term variable remuneration changes for proprietary lenders introduced by banks in 2024, the use of referrers by lenders, and lender oversight of brokers,” ASIC said.
Referral channels in focus
ASIC’s decision to review lender use of referrers comes amid heightened scrutiny of bank introducer arrangements following recent mortgage-fraud revelations.
In February, the Commonwealth Bank of Australia (CBA) self-reported potential mortgage fraud of around $1 billion to police and corporate regulators.
The reported concerns were understood to involve lending originated through both mortgage brokers and the bank’s introducer channel.
The Finance Brokers Association of Australia (FBAA) subsequently called on banks to dismantle introducer and referral programs and overhaul internal approval practices.
The association argued that referral structures could be misused and should not escape scrutiny at a time when the industry was confronting suspected document fraud and money-laundering risks.
Broker oversight under microscope
The review’s other major distribution focus is lender oversight of brokers.
ASIC’s wording signals attention to the systems lenders use to accredit, supervise and monitor broker-originated lending.
That could include lender controls around broker accreditation and re-accreditation, application quality, loan-performance data, exception reporting, fraud indicators, customer outcomes, conflict management and remuneration arrangements.
It may also test how lenders support compliance with the Best Interests Duty.
ASIC linked the planned review to work it had conducted with the Australian Prudential Regulation Authority (APRA) and financial-crime agency AUSTRAC in response to reported mortgage-loan fraud.
“This review follows ASIC’s work with APRA and AUSTRAC in relation to reported instances of mortgage loan fraud,” ASIC said.
In August, AUSTRAC’s Fintel Alliance said Operation Claw had identified coordinated suspected mortgage fraud and systemic weaknesses after analysing information from 10 Australian banks.
The project identified potentially hundreds of millions of dollars in suspect lending, with a significant concentration linked to Sydney properties.
AUSTRAC said suspected conduct included inflated income, misrepresented employment and fabricated business activity, while repeated brokers, accountants and law firms emerged in some applications.
It referred around 200 mortgage brokers, accountants, lawyers, and other entities to relevant authorities and regulators.
Incentives return to agenda
ASIC will also assess the effects of banks’ 2024 changes to short-term variable remuneration for proprietary lenders.
The issue reopens debate over front-line sales incentives after the Sedgwick Review and Hayne Royal Commission drove banks to limit remuneration structures that could encourage sales ahead of customer outcomes, compliance and loan quality.
Since then, major banks have moved to lift bonus caps, with CBA, for example, raising the maximum short-term incentive available to some bankers from 50 per cent to up to 80 per cent of base salary.
AI, small business, and offsets
The lender-and-broker review sits alongside several other ASIC banking priorities.
ASIC expects to begin a review of banks’ use of artificial intelligence in the second quarter of 2026–27, concentrating on new and proposed use cases and their customer impacts.
“ASIC will continue its oversight of AI adoption in financial services by commencing a banking sector AI review. The review will be focused on new and proposed use cases of AI by banks and the impact on customers,” ASIC said.
“We will collaborate with APRA to minimise duplication from any work they are undertaking relating to risks presented by the use of AI.”
ASIC said it recognised the potential benefits of AI, but stressed that consumer protections must remain intact where systems influence customers and credit decisions.
The regulator will also examine non-bank lending to small businesses, including whether unfair contract terms or other practices are producing poor outcomes.
“We will examine lending practices by non-bank lenders that can lead to poor outcomes for small businesses, including the use of unfair contract terms. We will gain insights into lending by banks to the sector through the review being conducted by APRA to reduce duplication for industry,” ASIC said.
Meanwhile, mortgage offsets remain an ongoing priority after ASIC’s review of eight banks found shortcomings in the administration of promised offset benefits.
ASIC said banks should assess their remediation, governance, monitoring and controls in response to the findings and warned it would continue to monitor the issue and act where appropriate.
[Related: ASIC reveals probe into further 24 private-credit funds]
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