Hundreds of millions of dollars of suspected fraudulent loans have been uncovered at 10 major banks during an operation involving Australia’s top-tier financial regulation and criminal intelligence agencies.
Operation Claw has exposed coordinated mortgage fraud and “systemic weaknesses” across the lending sector, with properties, mainly in Sydney, being bought in a way that does not comply with laws meant to ensure responsible lending and cut down on dirty cash.
“The scale of this activity should be a wake-up call for every lender,” AUSTRAC chief executive Brendan Thomas said.
“The same warning signs were found across banks that together cover the vast majority of Australia’s mortgage market.
“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.”
Brendan Thomas says the revelations should act as a “wake-up call” for lenders. (ABC News: John Gunn)
The banking industry said it welcomed the action by the financial crimes agency and would continue to work with law enforcement and regulators to stamp down on suspected fraud.
“This work has included intelligence sharing between banks and AUSTRAC through the Fintel Alliance, which has already proven effective in uncovering fraudulent loan activity,” Australian Banking Association chief executive Simon Birmingham said.
Simon Birmingham says the banking industry needs access to ATO income data. (AAP: Lukas Coch)
Mr Birmingham said banks would continue to advocate for secure access to income data from the Australian Taxation Office (ATO) to help reduce the use of fraudulent loan documents.
“Verified ATO data would give lenders a single, trusted source of truth for a customer’s income and be a new tool banks could deploy to prevent loan fraud into the future,” he said.
Years of ‘liar loan’ warnings
The money has been lent out in what are called “liar loans”.
AUSTRAC described the suspected fraud as using the following to support loan applications:
- inflated incomes
- misrepresented employment
- fabricated or unverifiable business activity
There were also cases in which “offshore or third-party funds” were used to finalise settlements and make mortgage repayments.
The agency said this demonstrated how false income streams and complex funding arrangements can wash money through the Australian property market.
It is not a new issue.
In recent years, investment bank UBS asked borrowers about their honesty when filling out applications. In 2021 its survey of about 900 people showed 41 per cent submitted loan applications that were not completely factually accurate.
The most common areas of inaccuracy were under-representing living costs (34 per cent), under-representing financial commitments (28 per cent) and over-representing income…
Read More: ‘Coordinated mortgage fraud’ uncovered as AUSTRAC puts banks on notice over
