As a multibillion-dollar fraud scandal rocks the mortgage industry, Australia’s major aggregators have revealed that broker involvement appears limited and are calling for better data sharing between lenders and aggregators.
With estimates of fraudulent loans across the big four banks ballooning to $3 billion, financial regulators, associations, aggregators, and lenders are all working to understand the size and scale of the alleged issue, which appears to be a global problem.
While there is no single industry-wide mortgage ‘probe’ into aggregators, a series of bank-led reviews and separate regulatory processes are currently underway to identify whether mortgage applications have been approved on the basis of fraudulent documentation (for example, that created by artificial intelligence [AI]).
To date, just two aggregators – Finsure (as well as its sub-aggregation group Hai Money) and LMG – have been named by mainstream media as allegedly having members involved in suspected fraud. However, both aggregators have outlined that they have taken action to suspend or terminate any brokers identified and have high compliance monitoring.
The referrer problem
While mainstream media has repeatedly cited bankers casting blame on the broking industry, Australia’s largest mortgage aggregators have told The Adviser that broker involvement so far seems focused on documentation provided to brokers via referrers. This may include referrers passing on false income slips and doctored employment records.
Speaking to The Adviser, LMG CEO and executive director Ewen Stafford told The Adviser that more could be done across the entire finance industry to stamp out loan fraud and detect players utilising fraudulent AI documentation.
While he said LMG works closely with lender partners, ASIC, and relevant regulatory bodies to escalate issues where they arise, he said he agreed with the broker associations that “this is a whole-of-industry challenge that cannot be solved in a vacuum and requires a co-ordinated response across banks, aggregators, regulators and law enforcement”.
“Both the FBAA and MFAA have highlighted the risks in introducer and referral arrangements, which sit outside the regulatory framework governing licensed brokers,” he said.
Stafford also said LMG would support the establishment of a mandatory cross-sector misconduct register, co-governed by ASIC, the ABA, the MFAA, and the FBAA.
The LMG CEO added that there are annual reviews currently being concluded that involve the five largest banks that will provide assurance reports relating to mortgage aggregators, which were welcome.
Interrogation of documentation from referrers was also flagged by AFG’s general manager for industry and partnerships, Mark Hewitt, who stated that the group stresses to both lenders and brokers “the importance of understanding their lead and referral sources”.
“Fraudulent activity can take many forms, and this is not a broker channel issue, it is a whole of industry issue, and we will continue to work closely with the industry to eliminate the impact fraud can have,” Hewitt said.
While the GM noted that the ASX-listed aggregator had “not been contacted by regulators in relation to the matters referenced”, he emphasised that AFG “takes compliance with all laws and regulatory obligations extremely seriously, and it is fundamental to how we operate”.
This included onboarding background checks for new members, broker education and guidance, ongoing compliance monitoring, regular reviews and audits, enhanced checks where risk indicators are present, and firm consequences for breaches of its policies and standards.
“AFG continues to monitor emerging risks within the industry, including technology-enabled document manipulation, and we regularly review and strengthen our controls accordingly,” he said.
Meanwhile, Blake Buchanan, general manager of Specialist Finance Group (SFG), also told The Adviser the aggregator had “not identified or reported any brokers in connection with any current mortgage fraud investigations”, which he attributed to the group’s governance, onboarding, and ongoing oversight frameworks.
He said: “While the narrative is increasingly focused on AI-generated fraud, the reality is that fraudulent activity, regardless of sophistication, ultimately comes down to the integrity and traceability of supporting information and the humans supplying it.”
He said that SFG had “significantly strengthened” its audit and compliance framework through a “digitally enhanced program that leverages AI-driven tools to identify anomalies, supported by rigorous investigation processes”, as well as strong reporting protocols to lenders and regulators over recent years.
“We have also implemented strict controls around referral relationships. We do not engage or remunerate referrers without formal agreements in place, including full due diligence such as police checks, credit checks for directors, and ASIC reference checks,” Buchanan said.
The SFG GM also has a core requirement for brokers to “clearly evidence the origin of all supporting documents”, including direct verification from clients, employers, financial institutions, accountants etc, with appropriate audit trails.
“If the source of information cannot be substantiated, it is treated as a serious compliance concern,” he said.
“With the continued adoption of open banking, lenders are sourcing more data directly, reducing reliance on broker-supplied documentation.”
Major aggregation group Connective has also flagged that many of the issues seem to stem from referrer programs.
Speaking to sister brand Broker Daily, Daniel Oh, group legal counsel at Connective Broker Services, said: “Now, that is not a mortgage-broking channel, that’s not even a third-party channel, that is linked to the bank’s proprietary channel.”
Oh pointed to “chain of custody” over documents as a critical control, particularly as falsified payslips and bank statements become more sophisticated.
“Fraud is everywhere and no channel has a monopoly,” Oh said.
“What is key from my perspective, and what we always train our brokers on, is chain of custody and control – where did you get the documents from?”
Connective has increasingly pushed brokers towards sourcing information directly through secure channels, such as open banking, allowing brokers to obtain documents straight from the source and reducing the risk of manipulation.
“The issues so often come when the customer emails documents through, or when brokers say they’ve hand-collected them,” Oh said.
“If a lender asks where that document came from and the broker can evidence it, it’s usually fine. But when they can’t demonstrate that, that’s when the trouble arises.”
Major brokerage perspective
Major brokerages have also been vocal about strengthening detection of fraudulent documentation.
Yellow Brick Road’s newly appointed chief risk & compliance officer, David Flynn, said he believed the current focus by regulators, lenders, and industry bodies on detecting and preventing loan fraud is “both necessary and appropriate”.
“We support initiatives that strengthen document verification, improve data sharing, and close gaps that can be exploited, including the use of enhanced verification tools and broader access to reliable third‑party data sources,” he said.
“Importantly, addressing these issues requires collaboration across the entire lending ecosystem,” he added and acknowledged that YBR works closely with lenders, other aggregators, and industry bodies to “uplift standards, share information responsibly, and ensure that poor practices are identified and removed as quickly as possible, while adhering to core privacy and confidentiality requirements and obligations”.
“Constructive engagement across all industry participants is essential to maintaining trust in the system.
“Compliance is not aspirational; it is a fundamental condition of operating in this industry. YBR remains focused on supporting quality brokers, protecting borrowers, and contributing to a mortgage market that operates with integrity and in the best interests of Australians seeking to achieve their property goals.”
Speaking on behalf of Mortgage Choice, CEO Anthony Waldron said that the group was not investigating any of its brokers and had not been asked by lenders to investigate any Mortgage Choice brokers as a result of the mortgage fraud probes.
He told The Adviser that Mortgage Choice continues to offer ongoing training and compliance updates for its broker community and recently built out artificial intelligence-run Gemini Gems to support its broker network with compliance and identifying fraudulent documentation.
Similarly, Brad Cramb, chief distribution officer at Lendi Group (and the newly elected deputy president of the MFAA's Aggregators Forum), told The Adviser that no brokers within its network had been identified in relation to this probe, but added that Lendi Group takes “any allegation of misconduct seriously”.
“We expect all brokers operating under our group to comply with applicable laws, regulatory obligations and our internal standards,” he said.
“We engage regularly with lenders, regulators and both the industry to support information sharing and the early identification of suspicious activity. This includes co-operating with AUSTRAC, ASIC and lending partners where required, and participating in broader industry discussions with both MFAA and FBAA on emerging risks and how to strengthen oversight and reporting frameworks.
“We also engage across the industry on emerging risks, including the use of AI and evolving document verification challenges, to help strengthen safeguards and reduce the risk of consumer harm.”
Earlier this week, the Finance Brokers Association of Australia (FBAA) demanded banks dismantle their introducer and referral programs and overhaul internal approval practices, as the industry grapples with revelations of large‑scale mortgage fraud.
Interim FBAA CEO Peter White AM commented: “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.
“It is accepted that referral and introducer programs can be misused, and now they should be eliminated,” White added, in a direct call for banks to shut down the schemes completely.
Referral programs have come under ongoing scrutiny by regulators, 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.
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.”
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).
The finance industry bodies have said that if lenders are able to draw on central “points of truth” – for example, by expanding the CDR regime to incorporate income data from ATO tax returns or ASIC company registry data – lenders would be able to more effectively verify borrower information and combat the rising threat of AI-generated fraudulent documents.
What do you think could be the solution to better identifying players submitting loan applications with fraudulent documentation? Let us know in the comments below!
[Related: Calls mount to use ATO data in open banking to reduce fraud risk]
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