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Hundreds of millions in suspected fraudulent home loans exposed
Australia’s mortgage sector has been rocked by suspected fraud, with a regulator potentially finding hundreds of millions of dollars in fraudulent home loans.
A joint analysis of data from 10 major Australian banks by the Australian Transaction Reports and Analysis Centre’s (AUSTRAC) Fintel Alliance found potentially hundreds of millions of dollars in suspected fraudulent home loans.
The project, titled Operation Claw, identified suspected cases of inflated incomes, misrepresented employment and fabricated or unverifiable business activity used to support loan applications, mostly linked to properties in Sydney.
As part of Operation Claw, cases were identified where offshore or third-party funds were used to complete property settlements and make mortgage repayments.
AUSTRAC said the findings demonstrated how falsified information could be used to provide access to the property market, with the activity not confined to one lender or borrower group.
AUSTRAC CEO Brendan Thomas said the findings of the operation had exposed vulnerabilities in the lending sector.
“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,” Thomas said.
“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.”
Fintel Alliance has provided the names of individuals and entities potentially involved in the false submissions to law enforcement and regulatory agencies, including ASIC, the ATO, and the Tax Practitioners Board.
Following the findings, AUSTRAC has called for the industry to examine its mortgage books for signs of fraud and to report any suspicious activity.
Thomas said the most effective way to prevent fraud from occurring was to stop it before it was approved.
“Every lender should be looking closely at these findings and asking whether the same vulnerabilities exist in their own business,” he said.
“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.”
Several of the participating banks have used the information gathered by Operation Claw to identify the potentially fraudulent loans and investigate suspicious activity.
Additionally, AUSTRAC has worked with the participating banks to identify practical controls that lenders can use to detect and disrupt mortgage fraud.
Thomas said the findings demonstrated the value of AUSTRAC and Fintel Alliance’s role in identifying emerging threats and disrupting serious financial crime.
“Each bank may see only one fragment. When those fragments are brought together, the broader pattern becomes clear.”
“Mortgage fraud succeeds when those fragments remain disconnected. Public-private information sharing allows government, banks and law enforcement to identify threats earlier and take coordinated action.”
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