So, back to work, fully recharged and ready for 2019!

Mind you, I wouldn’t mind being back on that cruise ship in the Caribbean enjoying the sunshine again.

And it’s on that cruise ship that I would like to start my article today.

If you have ever had the opportunity to stand on deck, or better still on the bridge, when a large ship docks, you will know that it takes some serious skill to bring it alongside without causing damage to the hull or its cargo. That is where the Pilot comes in.

A Maritime Pilot is a specialist, a highly experienced sailor, usually familiar with a particular stretch of sea or, more commonly a particular harbour. The role of the Pilot is to manoeuvre the ship to a fine degree of accuracy, which allows the ship to enter and exit a particular port safely.

The Pilot, you could say is an expert, or an authority, in his particular area (or harbour) and is relied upon by even the most experienced Captains, regardless of how often they visit a particular port.

The role of the Pilot is not an easy one, they must take into consideration all sorts of factors and conditions, which is why obtaining accurate information (about the tides, and weather for example) is so important. That, coupled with significant experience makes them such a valuable commodity.

Anyway, back to me standing in the sunshine, as our Ship docked in St Lucia!

I realised that the role of piloting a ship is not so different from the roles of mortgage and insurance advisers. Yes, both roles rely heavily on accuracy. If a pilot failed in his accuracy, his reputation would be ruined and his career over. The same is true for you, whether you are a mortgage or a protection adviser, your customers rely on your accuracy and so do the lenders and insurance providers.

At a recent fraud forum I attended, it was stated that application fraud (in both mortgage and protection areas) is still the number one fraud risk seen.

I was shocked to hear that particularly, mortgage applications, are still being submitted to providers without the clients’ income and expenditure having been reviewed correctly, or even at all in some cases.

In fact, one lender stated that more than 80% of all fraud they witness relates to employment and income, with a large share of that being down to false documents or manipulation.

It would appear, then, that accuracy is not the most important thing to some advisers; but to ignore the lenders repeated calls for accuracy (and there have been many) jeopardises your future in the industry.

Case Study

Consider one recent case – we’ll call the adviser John.

John had been with the network for many years, he had a mediocre compliance track record and wrote around £45k of business each year. He had been in the industry for over 20 years and thought he knew what he was doing.

John received all of the network and lender updates and his CPD record showed that he would even read some of them, so he knew about fraud risk.

At each compliance visit, John would have his internal processes reviewed and his knowledge of network standards and expectations tested. He was often quizzed about introducers, proof of income, money laundering and so on.

John was adamant that he never dealt with introducers, met all his clients face to face for every piece of business and always saw original documents, which, he of course, reviewed thoroughly and compared with each other before submitting an application to the lender.

To cut a long story short, it was established that John did indeed accept introduced business and to make matters worse, he would allow the introducer to complete the fact find and to obtain client documentation; what John didn’t realise, perhaps out of naivety, was that the introducer was producing false documents and manipulating application data to help individuals obtain mortgages to which they were not entitled.

Needless to say, after a thorough investigation by the lender, John was removed from their lending panel and the network, through whom John derived his regulatory authorisation, took the decision to terminate him and to inform the regulator.

John, like an incompetent Pilot, will struggle to find employment in this industry again.

So what can you do to stop yourself falling into John’s trap?

As with the Pilot – ensure that you know the ‘waters’ in which you operate; make sure that you know the prevailing conditions for each harbour (or in your case, customer) and be on the lookout for danger.

Fraud Tips

Here are a few tips to help you stay on the right side of Lenders, the Network and the Regulator.

• Watch out for customers who have recently started a new job;
• Watch out for customers who have recently had a pay rise;
• Look out for additional income streams which may be difficult to quantify;
• Look out for income that seems implausible, or out of line with their position;
• Be cautious if a customer is employed by a family member;
• Check bank statements to see what the payment method is (faster payments can often be an indicator or staged income);
• Always disclose, accurately, the financial position of your clients;
• Check payslips forensically – If you need guidance on what to look for, consult your compliance manager;
• Ensure that the copy documents are clear and appropriately certified;
• Conduct background checks, perhaps with the employer;
• Register all introducers and conduct thorough due diligence on them.

These are, of course, just pointers, guidance if you will, based on lender experience. This is not a statement that any of these particular areas are guaranteed to be fraudulent.

Often, application fraud isn’t down to a fraudulent or even a desperate adviser, it is more often down to incompetence, failure to follow process, and complacency – the “it’ll happen to someone else” mentality.

Don’t let it happen to you.

And finally…

It may seem like an exaggeration to say that lives are at stake when a potentially fraudulent mortgage is written, but that is precisely the case.

One recent fraudulent application (in which a broker was deemed to have been complicit by supplying false documents) resulted in the lender notifying the National Crime Agency (the department responsible for the enforcement of the Proceeds of Crime Act) of a potentially fraudulent case. Further investigations led to an organised crime ring with one of its members living in a caravan full of bomb making equipment.

Be under no illusion, organised crime gangs are looking for desperate or unwitting advisers to help them achieve their own ends, and acts of incompetence or desperation, literally risk the safety of us all.

So, in conclusion, please remember:

• Be Diligent;
• Be Vigilant;
• Be Accurate.