New referrer guidelines released as industry confronts fraud risks

The release draws on the MFAA’s Fraud and Referrer Working Group and comes as referral practices attract greater regulatory attention.

The MFAA stressed that its guidance was not mandatory and did not create legal obligations, replace existing requirements or prescribe a single operating model.

The association intends to allow around six to 12 months for the industry to operationalise before considering whether any elements should be uplifted.

MFAA CEO Anja Pannek said the potential damage from fraud made prevention a shared responsibility across the lending chain.

“Trust is what our financial system runs on, and fraud anywhere along the lending chain has the potential to undermine trust everywhere in it. Protecting that trust is a collective responsibility,” Pannek said.

She added that the industry’s response needed to be grounded in evidence rather than assumptions about which participants presented a risk.

“No single part of the ecosystem can address these risks alone. Our response has to follow the conduct and the evidence, rather than begin with assumptions about where the risk sits,” she said.

“That is why we have worked collaboratively with a cross section of our members to develop practical guidance that supports a consistent approach to identifying and managing referrer risks across the industry.”

Broad coverage without a blanket approach

The MFAA said the guidance aimed to strengthen oversight of a commercially important source of business, while expressly avoiding discouraging legitimate referral activity.

According to the association, research undertaken by Deloitte for its Value of Mortgage and Finance Broking 2025 report found referrals accounted for 40 per cent of leads reported by surveyed mortgage brokers, including introductions from existing customers and third parties.

The guidance’s coverage extends well beyond paid introducers, and also accounts for unpaid referrals, lead-generation businesses, digital sources, commercial partnerships and related-party arrangements, alongside referrals between mortgage and finance brokers.

Relationships with property, legal, accounting, taxation, financial services and other professional intermediaries also fall within scope, as can interstate and offshore arrangements involving individuals, companies, trusts, partnerships or other entities.

The association said the breadth of that coverage was balanced by an approach that distinguished routine relationships from those requiring closer attention.

“The level of due diligence, monitoring and oversight applied to a referral relationship should generally be proportionate to the nature and level of risk presented,” the guidance said.

“Higher-risk arrangements may warrant enhanced scrutiny, additional controls or more frequent review, while lower-risk arrangements may require less intensive oversight.”

It also placed particular emphasis on understanding the referrer’s operations and the origins of prospective customers, while making clear that oversight should continue throughout the relationship.

“Industry participants should take reasonable steps to understand who they are dealing with, the nature of the referrer’s business and how referred customers are sourced. Appropriate due diligence can assist in identifying potential fraud, conflicts of interest, customer harm and other conduct risks before they arise,” it said.

“Referral arrangements should be appropriately documented, monitored and governed having regard to the nature of the relationship and applicable legal and regulatory requirements.”

When an introduction crosses the line

A central focus is the distinction between legitimate referral support and conduct that may indicate shadow or proxy broking.

The guidance flagged situations where an introducer remains closely involved after connecting the customer with a broker, becomes the main source of application documents, or starts expressing views about which lender or product the customer should choose as requiring further investigation.

The concern intensifies where the referrer controls customer access, leaving the broker with little or no direct engagement, prepares an application for the broker merely to submit, directs product selection or coaches the customer’s answers.

Customers who appear rehearsed or cannot explain their own application information are another warning sign.

Those concerns sit within a broader framework examining how referral businesses operate, where their commercial interests lie and whether customers understand the relationship.

The guidance noted that high volumes or a concentration of referrals may warrant further attention, as may opaque ownership, complex payment structures and connections to several parties within the same transaction.

Property- or investment-linked models, high-pressure sales environments and interstate or offshore activity were also identified as considerations.

On the customer side, concerns include people who do not know who referred them or why, misunderstand the arrangement, appear coached or cannot explain important application details.

Repeated complaints, similar fact patterns across referrals and unusual behaviour, transaction structures or funding arrangements may also warrant investigation.

Vulnerable or inexperienced customers who appear heavily dependent on the referrer are another consideration.

From identifying concerns to taking action

The practical framework centres on knowing referrers, documenting arrangements, maintaining appropriate boundaries and records, and monitoring how relationships operate.

Where concerns arise, the guidance called for a process capable of moving beyond detection to investigation and escalation.

“Where red flags, misconduct concerns, fraud indicators or other elevated risks are identified, businesses should have processes to review, investigate and escalate concerns as appropriate,” it said.

“Depending on the circumstances, this may include enhanced due diligence, additional monitoring, suspension of the referral relationship, termination of the arrangement or referral to relevant internal or external stakeholders.”

The document also addressed the other side of the relationship: referring a customer to another provider.

It called for reasonable care in establishing whether the recipient holds relevant licensing, authorisation, or accreditation, understanding their business and considering known reputational or conduct concerns.

Transparency with the customer is another element, including explaining the relationship and any payment or benefit, and obtaining appropriate consent before sharing customer information.

Part of a wider push against lending fraud

The MFAA said the guidance was one strand of a broader response involving regulators and industry participants.

“The release of the guidance forms part of a broader programme of work the MFAA is leading to address fraud in the mortgage lending system, including engagement with regulators, opportunities to improve information sharing, member education, awareness and collaboration across the industry,” the association said.

MFAA executive, policy and legal Naveen Ahluwalia said the working group’s examination of lending-system vulnerabilities had identified referral oversight as one key opportunity to strengthen protections.

“Through our Fraud and Referrer Working Group, we have been examining vulnerabilities across the lending system and identified this as one of a number of practical opportunities to strengthen safeguards,” Ahluwalia said.

“Referral relationships are one area where a consistent understanding of good practice can make a meaningful difference.”

[Related: ASIC to review referrer programs, lender oversight of brokers]