Authorities have uncovered coordinated mortgage fraud with foreign actors exploiting weak oversight of lending rules to unlawfully funnel money into property. In particular, the Sydney market has been the focus of the illicit money.
In what’s been described as a “wake-up call” for the big banks, AUSTRAC’s Fintel Alliance has revealed the extent of mortgage fraud it has uncovered after combing through the lending books of 10 major Australian banks and analysing the data. It said investigators found potentially hundreds of millions of dollars in suspected fraudulent loans, mostly concentrated in Sydney.
“The scale of this activity should be a wake-up call for every lender. The same warning signs were found across banks that together cover the vast majority of Australia’s mortgage market,” AUSTRAC CEO Brendan Thomas said.
RELATED
Dubbed Operation Claw, the long-running investigation found what authorities suspect are thousands of dodgy applications which misrepresented the financial position of the applicant, in orchestrated liar loans, often facilitated through brokers.
AUSTRAC says it identified suspected mortgage fraud involving inflated incomes, misrepresented employment and fabricated or unverifiable business activity used to support loan applications.
Authorities say in certain cases offshore or third-party funds were used to complete property settlements and make ongoing mortgage payments, highlighting how the relatively lax regulations around the property market have allowed foreign money to flow into Australian real estate.
“While this project did not identify evidence of widespread money laundering, the weaknesses it exposed could be exploited by criminals seeking to abuse Australia’s financial system,” Thomas said.
The AUSTRAC boss says the banks are also on notice about the dodgy loan applications underpinning a small portion of their lending.
“Every lender should be looking closely at these findings and asking whether the same vulnerabilities exist in their own business,” he said.
“The most effective way to stop mortgage fraud is before a loan is approved. Once a loan is established and the funds have moved, recovering the money becomes significantly harder.
“Lenders need to actively look for these warning signs, strengthen their controls and report suspicious activity to AUSTRAC. This is not something any institution can afford to ignore.”
Read More: Sydney is the epicentre of mortgage fraud found in analysis of major banks’
