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ASIC focusing on loan fraud within banks

by Annie Kane11 minute read
ASIC focusing on loan fraud within banks

The Australian Securities and Investments Commission has said that while the banks’ loan assessment processes have “improved markedly” in recent years, it “wants to focus on those at the banks” that may be facilitating loan fraud.

The corporate regulator was brought before the Parliamentary Joint Committee on Corporations and Financial Services on Friday (19 October) for its inquiry into Oversight of ASIC, the Takeovers Panel and the Corporations Legislation No. 1 of the 45th Parliament.

During the six-hour hearing, several senior members of ASIC were asked questions relating to the findings of the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry, ranging from enforcement to conflicts of interest and loan fraud. 

The committee noted that while there seemed to have been several announcements regarding restitution and compensation for bank customers that had been impacted by insurance or financial planning, “very little appears to be being done in the loan space”.


“There seems to be no acceptance by the banks of their poor conduct in that space,” the committee argued.

ASIC’s representatives outlined that it had been undertaking an “important volume of work in and around responsible lending”, noting several cases brought to the courts recently, including Westpac’s alleged failure to assess borrower living expenses and ANZ’s failure to recognise fraudulent car loans

Speaking in relation to loan fraud, the corporate regulator noted that it was particularly interested in stamping out fraud within the banks.

Tim Mullaly, senior executive leader of the financial services enforcement team, said: “Last Friday, we did announce that a mobile lender from CBA was to stand trial in respect to conspiracy to defraud Commonwealth Bank and that conspiracy is in the amount of excess of $110 million worth of loans.

“[W]e want to focus on those at the banks because without them, it is very difficult to facilitate the fraud.”

Mr Mullaly added: “We are looking to see where we can take action and there are other investigations in aspect of fraud [ongoing].”

Likewise, Michael Saadat, senior executive leader for deposit takers, credit & insurers, noted the work that ASIC had been doing in relation to loan fraud over the years. 

He said: “We’ve done a lot of work across the industry to raise standards [in relation to the bank’s assessing borrower expenses]. 

“It’s fair to say that since 2015, surveillance has increased substantially and the approach the banks are taking to assessing borrowers has improved markedly. Our work has been done in conjunction with APRA to make sure that borrowers do get loans they can afford but also making sure that, if they are in an interest-only loan, for example, that that product is suitable for the customer that is getting it.”

Mr Saadat added that ASIC is “undertaking a broader review of loan fraud to understand what the industry is doing to prevent and detect loan fraud”, adding that while customer-related loan fraud “could be happening”, the regulator’s focus at the moment is on the corporations — but the broker market, too. 

“The conduct that were focused on is when the broker or bank officer is implicated in that conduct,” Mr Saadat said. 

“In the case of ANZ, they paid a $5 million penalty as a result of conduct in relation to some finance brokers that were arranging car loans, because as I say, ANZ should have known that those documents were fraudulent. So, this has been a long-standing focus for us and we continue to act.” 

ASIC recently revealed that it would publish the findings of its home loan shadow shopping exercise and its review on loan fraud as well as launch a new home loan data collection project in 2019.

The findings from the shadow shopping project of the home lending market will be published by 30 June 2019, while the findings from its review on loan fraud in the consumer credit market, which includes the home loan market, will be published by 31 March 2019. 

[Related: ASIC mortgage reports due next year]



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