The broker associations have pushed back at suggestions that the broker channel may be perpetrating fraud.
On Friday (27 February), mainstream media reported that the Commonwealth of Bank of Australia (CBA) had self-reported to the police and corporate regulator concerns regarding potential mortgage fraud totalling an estimated $1 billion.
While the bank has not provided details of the suspected fraud, reports published by The Australian Financial Review suggest that the major bank has identified fraud in home loan applications introduced by both brokers and introducers.
The reports build on previous concerns flagged about “compliance issues and potential fraud” in home loan referrals from real estate agents, lawyers, and other partners.
However, the broking industry has hit back at suggestions that fraud is being perpetrated by the mortgage broking industry as a whole.
This comes after a spokesperson for CBA told the Financial Review: “This is an industry-wide challenge, with fraud being attempted through mortgage broking and referral channels.”
The Mortgage & Finance Association of Australia (MFAA) has outlined that the statement appears to suggest fraud risks associated with mortgage brokers, adding that it is critical to clearly distinguish between licensed mortgage brokers operating under the National Consumer Credit Protection Act and other referral or introducer arrangements that are not subject to the same regulatory framework.
CEO Anja Pannek told The Adviser: “Licensed mortgage brokers are subject to strict regulatory obligations, including the best interests duty, licensing requirements, professional standards, education requirements and oversight by ASIC and aggregators.
“Fraud is a serious issue across the entire lending system. Where it is identified, it must be addressed decisively, including examining where controls or checks and balances may have failed and implementing improvements where required.”
Pannek noted that while details of the matter referenced in the Financial Review have not yet been made public, the MFAA remains committed to constructive engagement with lenders, regulators, and industry participants to ensure strong governance and effective fraud prevention remain a priority.
To support ongoing collaboration, the MFAA has established a cross-industry working group comprising aggregators and lenders to review risks associated with referral and introducer models.
“We are proactively developing options to present to the regulators and industry to mitigate emerging risks and strengthen confidence in third-party distribution,” Pannek said.
Meanwhile, a spokesperson from the Finance Brokers Association of Australia (FBAA) flagged that artificial intelligence (AI) was increasingly being used by those looking to perpetrate fraud in home lending applications, outlining the need for brokers to be vigilant in interrogating information provided by borrowers.
“This is a reminder that AI brings with it challenges as well as benefits,” the spokesperson said.
“Like all sectors, finance and mortgage brokers must be vigilant and ensure that all applications undergo the appropriate levels of due diligence and compliance, ensuring information provided is accurate and verified.
“Brokers already do this, which is why they enjoy the trust of consumers, lenders and regulators, but as technology used by criminals increases, so must our systems and checks.”
Both the MFAA and FBAA provide ongoing professional development and training across compliance, fraud detection, and technology usage to ensure the standard of the broking industry remains high.
[Related: Industry responds to introducer program compliance concerns]
