​Tech gap sees brokers blamed for fraud

by Amy Rosenfeld19 Feb 2014
Following a Melbourne broker’s ban for failing to verify documents, lenders and aggregators have been called on to help brokers meet ASIC requirements.

Parmjit Singh yesterday had his license cancelled by ASIC after he “failed to verify payslips, bank statements and employment references in circumstances where suspicions should have been raised as to whether these documents were valid”.

ASIC’s guidelines require that brokers take “reasonable steps” to verify income and other documents, but QED Risk Services director Greg Ashe says a lack of technology makes this difficult for many brokers.

“There’s a resources gap between what the brokers have got access to and what the banks have got access to,” says Ashe.

“A broker might have absolutely no idea and no way of knowing that a particular bank statement is fraudulent, but the banks with their technology and the information sharing between them might do - and then the broker gets flicked for it! Now that’s tough.”

Ashe has seen a number of instances, especially when the major banks are involved, where a broker has lost their accreditation for failing to pick up false documents – even though they may not have the resources to do so.

Otto Dargan, director of the Home Loan Experts, says this has been a real issue for brokers in the past.

“The key thing for us is it would be really good if we could have a contact at each of the major lenders where we could verify documents. They do this with each other; If CBA receives a Westpac statement and they’re unsure about it they can email it to somebody at Westpac and they’ll just come back and confirm it.”

Dargan says he has requested this from “a few” lenders in the past, with no response. In the case of one particular statement they asked for verification on, the bank initially said they would help and then failed to respond to emails and phone calls on the topic.

“We’re making an effort, when are they going to make an effort?” said Dargan. “I understand there are privacy concerns but it would be really good if brokers and banks could work together on this.”

ASIC urges brokers to familiarise themselves with their obligations under RG209, which gives guidance on what brokers can do to ensure “reasonable steps” are taken to verify a consumer’s financial position.

“The obligation to make reasonable inquiries, and to take reasonable steps to verify information, is scalable—that is, what you need to do to meet these obligations will vary depending on the circumstances,” said an ASIC spokesperson.

“A broker should not facilitate the provision of suspect information to a prospective lender, and should consider referring evidence of fraudulent conduct to the police.“

Examples of situations where suspicions should be raised around the validity of documents include inconsistency in letterheads (eg ABNs, colour, graphics etc) and where the salary listed with a specific occupation raises suspicion, said the spokesperson.

While Ashe admits that the seemingly vague guidance on the issue can be a problem for brokers, he says the key is to “go with your gut”.

“I think brokers are used to rules, and with this whole world of NCCP comes this thing called ‘principles-based legislation’ whereby they don’t set rules they set ‘guiding principles’ and then they throw in words like ‘reasonable’, so it’s up to the individual to work out what they think is reasonable in the circumstances,” says Ashe.

“On the other hand when I start talking about it with a group of brokers, especially the experienced guys, it usually gets to the point where I say ‘Come on guys, you’re all really experienced, you’re really good at what you do, stick your hand on your heart and tell me you don’t know what’s reasonable and what’s not’.”

If brokers are concerned about their ability to verify documents, they should call on their aggregators to help, says Ashe.  They often have similar resources as some of the banks and a good understanding of the issue as a whole.

Overall, however, he doesn’t think the issue is something brokers should get too hung up on.

“Don’t get stressed about compliance, it shouldn’t be hard,” says Ashe. “If it’s too hard, you’re doing it wrong. Go with your experience and go with your gut.”

COMMENTS

  • by oldBroker 20/02/2014 11:05:19 AM

    This is a very important issue, because good brokers who are only doing their job could be caught-up in this. The question is: what constitutes reasonable investigation on the part of the broker's due-diligence?
    I would hope that the MFAA (if this broker is a member) would investigate this to determine whether the broker is indeed negligent or did adequate due-diligence but was stymied by inadequate tools, access to correct data, etc. If it is shown that the broker tried to do the investigation, then the MFAA should lobby on his behalf.
    Regardless of this particular's broker guilt or innocence however, the MFAA should be lobbying to remove this ambiguity from the NCCP regulations. This is very important.

  • by Phil in Finance 20/02/2014 11:28:26 AM

    It would also be very helpful to brokers if the ATO would be willing to confirm PAYG Summary and Notice of Assessments are genuine (or otherwise). It is a simple data match that could be completed easily if they wanted and a copy of the confirmation could then be sent to the lender.

  • by oldBroker 20/02/2014 2:57:11 PM

    This is a very important issue, because good brokers who are only doing their job could be caught-up in this. The question is: what constitutes reasonable investigation on the part of the broker's due-diligence?
    I would hope that the MFAA (if this broker is a member) would investigate this to determine whether the broker is indeed negligent or did adequate due-diligence but was stymied by inadequate tools, access to correct data, etc. If it is shown that the broker tried to do the investigation, then the MFAA should lobby on his behalf.
    Regardless of this particular's broker guilt or innocence however, the MFAA should be lobbying to remove this ambiguity from the NCCP regulations. This is very important.