| Police to tackle mortgage fraud |
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| Written by Adrie van der Luijt | |
| Wednesday, 05 March 2008 | |
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Police forces are being handed new guidance on how to identify and investigate organised mortgage fraud.
An intelligence report by the Association of Chief Police Officers (ACPO), which is marked RESTRICTED and is not being published in full, has been sent to the financial industry and to forces across the UK highlighting the nature of mortgage fraud. It was commissioned by ACPO following a request from FIN-NET, a financial crime intelligence unit hosted by the Financial Services Authority. FIN-NET, whose membership includes public bodies with an interest in the detection and prevention of financial crime, experienced a significant increase in reported mortgage fraud during 2007. Low risk of detection The report concludes that mortgage fraud is attractive to criminals because of the current low risk of detection and high profit opportunities. In one case, a fraudster made a profit of more than £10 million. Organised crime groups generate significant income from mortgage fraud and use the cover of property sales to launder the proceeds of their wider operations, including drug supply, human trafficking and prostitution. Mike Bowron, ACPO lead on economic crime and Commissioner of the city of London police, said that organised mortgage fraud can take many forms and while difficult to measure accurately, remains a significant element of the UK’s annual fraud losses. He added that in sharing this report with the financial industry and police forces nationally ACPO are raising awareness of the problem and how to tackle it. Joint intelligence operation Bowron explained that industry groups have started to introduce initiatives with the aim of ‘designing out’ mortgage fraud. The Financial Services Authority (FSA) is currently establishing a joint intelligence operation with City of London police and industry to improve knowledge of the scale of the problem and help guide efforts of both regulators and law enforcement. ACPO also supports the establishment of a National Fraud Strategic Authority (NFSA) as part of the Government’s Fraud Review Programme, which will assist with coordinating the response of law enforcement and the private sector. “Long gone is the notion that fraud is a victimless crime, and through this sort of joint approach we are working effectively to end it,” Bowron said. Transfer of asset wealth The report highlights that mortgage fraud has implications for society, over and above losses borne by the financial sector. It concludes that such activity represents a transfer of asset wealth from the legitimate to criminal sector, regardless of whether a loan is being repaid. Victims of mortgage fraud range from those who purchase a newly built property only to find that their home is worth considerably less than they paid for it through to those on low incomes who, through the actions of corrupt professionals, take on a debt they simply cannot afford. Whilst there is no evidence to suggest that mortgage fraud directly funds terrorist acts, this area of criminality has been encountered during investigations into UK based terrorist groups. Lenders rely on the integrity of mortgage brokers, solicitors, and surveyors to ensure proper oversight of the application process. Ramping up of commercial property values The report finds that all those involved in the mortgage chain, including lenders, have a role to play in reducing opportunities for fraud. Organised mortgage fraud takes many forms, from the overvaluation of ‘new build’ residential properties through to the ramping of commercial property values. Examples include:
Mortgage fraud is concentrated in pockets around the UK, with London being the main hot spot (46 per cent of cases). Mortgage fraud is generally committed by men in their mid to late thirties from a range of social backgrounds. Organised crime groups operating in this area are often grouped along ethnic lines depending upon their geographical location. There are inconsistencies in how the value and volume or mortgage fraud is currently measured. This makes it very difficult to determine a true estimate of the size of the problem. Enforcement action The report has highlighted confirmed mortgage fraud of around £700 million. Whilst this only represents a small proportion of the annual lending market; £370 billion in 2007, it remains a significant element of the UK’s annual fraud losses. The Financial Services Authority has for some time been working with lenders to identify mortgage intermediaries who may be involved in mortgage fraud, several of whom have now been subject to enforcement action. A joint intelligence operation with the City of London Police will also involve an ongoing programme of monitoring mortgage applications. Industry groups have already started to introduce initiatives with the aim of ‘designing out’ mortgage fraud. This includes the launch of the Council of Mortgage Lender’s guidance for property professions involved in new build sales. The Metropolitan Police Service is currently undertaking work to disrupt websites providing bogus documentation. There is also provisional agreement for the new National Lead Force for Fraud, the City of London Police, to tackle this area as one of its first priorities. Related articles
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