A major cross-bank investigation has exposed organised fraud networks and gaps in lender controls across Australia's lending sector, prompting a swift response from the broking industry as regulators move to tighten oversight of loan applications.
According to AUSTRAC, its Fintel Alliance identified potentially hundreds of millions of dollars in suspected fraudulent loans through a joint analysis of data from 10 major Australian banks, under an operation dubbed Operation Claw.
Most of the suspected fraudulent activity was linked to properties in Sydney, and involved inflated incomes, misrepresented employment, and fabricated or unverifiable business activity used to support mortgage applications and inflate borrowing capacity.
The Fintel Alliance also found cases where offshore or third-party funds were used to complete property settlements and make mortgage repayments — a pattern AUSTRAC said showed how false income streams and complex funding arrangements can be used to gain access to the property market.
The activity was not confined to a single lender or borrower group. AUSTRAC noted recurring warning signs across the participating banks, including falsified or misleading documents and the repeated use of the same mortgage brokers, accountants, and law firms across multiple applications, and said fraudsters have used tactics including fake invoicing and fake payslip arrangements.
Hundreds of brokers, lawyers, accountants, and other entities have since been referred to police, tax officials, and the corporate regulator.
Document fraud detection company Fortiro said the findings reflect what it has been observing directly.
Co-founder and CEO Sean Quagliani said fraudulent documentation is a persistent, measurable problem in the lending sector: "7% of the documents we see, including a significant portion of invoices and payslips, exhibit signs of fraud."
Quagliani said the mortgage sector now needs to close the gap that other parts of the financial system have already addressed.
"Broader reform has cut sophisticated fraudsters off from other forms of money laundering, such as gambling. It's time for the mortgage industry to strengthen its controls because financial criminals will always exploit the weakest link," he said.
Quagliani said the sector also needs to move beyond manual checks: "We're past the point where human verification is enough. We need to lift standards across the entire sector to make sure that we're capturing every possible signal of money laundering."
The findings have prompted a swift response from the broking industry. The Finance Brokers Association of Australia (FBAA) said its message to brokers remains consistent: adhere to professional responsibilities throughout the loan process and provide honest and ethical guidance to clients.
The association reaffirmed its opposition to fraudulent conduct, stating any broker found engaging in such practices "is not welcome in our industry, which places integrity, customer service, and transparency at the very core of our operations." It said the behaviour uncovered involves "a miniscule percentage of brokers," and that the broader industry remains highly professional and trusted, adding: "The evidence indicates that this behaviour is limited to a few, however we acknowledge that even this is too many."
The FBAA said it still lacks specific detail on AUSTRAC's investigation or what has been referred to law enforcement but noted reports that the conduct extends beyond brokers to other referrers, including accountants and lawyers — a practice the association has long raised concerns about, noting its position is supported by findings of the Hayne royal commission. It said lenders share responsibility for meeting compliance obligations and mitigating fraud risk.
The FBAA said it would continue working with lenders, aggregators, and regulators as more detail emerges from the investigation, positioning itself as part of the ongoing industry response.
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