Mortgage frauds keep stacking up across Australia's lending landscape.
Earlier this month, the New South Wales Financial Crimes Squad charged an accounting firm, two accountants and two alleged intermediaries in connection with a multi-million-dollar mortgage fraud and money laundering syndicate. Investigators allege those charged helped fabricate documents and misuse stolen personal information to submit loan applications worth more than $15 million. The latest arrests bring the total number of people charged in the investigation to 33.
The news comes off the back of reports this past fall that mortgage fraud was accelerating in Australia's lending market, putting brokers and lenders on alert, and prompting many to take a closer look at how loan applications are verified.
The issue became more prominent in December of last year, when former broker Andrew Hu, who operated under sub-aggregator Hai Money, was arrested on fraud charges. The Sydney-based firm subsequently collapsed the following April.
That same month, reports suggested that mortgage fraud had already become a multi-billion-dollar threat to Australia's lending sector. A key feature of the schemes is the manipulation of financial information, with borrowers allegedly altering or fabricating income documents to qualify for loans beyond their genuine borrowing capacity. And as AI tools become more sophisticated, fraudsters are increasingly able to produce convincing documents that can make those applications harder to detect.
But what was once limited to altered documents has quickly evolved into something far more complex. Now, brokers are forced to rethink how they detect and defend their businesses against increasingly complex scams.
The latest arrests have brought the issue of mortgage fraud back into the spotlight.
Leo Gagic, chief executive officer of the Finance Broker Association of Australia's (FBAA), said brokers and other industry participants should always remain alert to the risk of mortgage fraud and take steps to protect themselves. But he added that the number of arrests remains small relative to the size of the broader industry.
"You're talking about an industry that probably holds around 20,000 to 22,000 brokers in total," Gagic told Australian Broker. "And when you look at our 14,000-plus members, you talk about 33 arrests, and yeah, there might be more and stuff like that. But there's always bad actors in all industries. I don't know of any industry that doesn't have bad actors or people who don't do the wrong thing. So we've got to be careful here that this doesn't get taken out of context."
The CEO of the industry body added that many of these fraudsters are coming from a referral base.
"Not necessarily, to my understanding, from an accredited broker base," Gagic said. "So it's still accountant referrals and other referral sort of organisations."
On the ground, brokers say mortgage fraud and scams are still a concern.
"It's definitely something that we need to be mindful of and concerned about in the market. It's about ensuring that our systems have the compliance requirements to mitigate any possible issues from anything like that," said Adele Andrews, director and broker at Melbourne-based Australian Property Home Loans.
"AI definitely has a place and it's something that we've got to be very vigilant about," she continued. "But there's also no doubt that technology and AI is getting more sophisticated. There's no doubt about that, particularly when it comes to falsifying documents and, and all that sort of thing. Our systems and our processes will need to develop and evolve in order to overcome it. It's important to have all those double and triple checks in place to make sure that everything is coming through.
"The industry is doing everything they can to address it," Andrews added. "But whether we'll see more [fraud] or not remains to be seen. But I guess if we can stop as much of it right from the start, then I guess it's going to hopefully help dissolve the numbers that are coming through. And that's where the aggregators come into play. They're doing everything they can to help support us."
Adam Bradley, founder and director at Brisbane-based brokerage Emerge Finance, agreed that thorough due diligence on borrowers remains one of the best ways for brokers to protect themselves.
"We're very confident in our compliance checking and all of our documentation and things," he explained. "We've built in things to check for a lot of these documents and for fraud. We've got multiple ways of checking income and verifying IDs and things like that. So it's back to basics: checking incomes, checking ABN numbers, using face-to-face verification for every client, checking tax returns, making sure clients have got the same amount of dependents on their Medicare card, all those sorts of things.
"And a lot of our business is word of mouth, not necessarily through some of these big accounting firms and stuff like that," Bradley added.
Gagic also urged brokers to take a proactive approach, focusing on prevention rather than waiting for a problem to emerge. That means being cautious about referrals from unfamiliar sources and continuing to uphold their Best Interests Duty (BID).
"These arrests are significant, don't get me wrong," he said. "But there are bad actors in all industries.
"We've been advocating that brokers have got to do the right thing by the client to have a sustainable business, full stop," Gagic continued. "And there's certainly no room for bad actors in our industry. They need to be weeded out. So if you're doing the wrong thing, you don't belong in the industry. But at the same time, we've got the majority doing the right thing, and that's been our message."
