Are bankers-turned-brokers slipping past Australia’s fraud radar?

The broking industry is calling for reforms to the way bank employees are tracked when they transition into mortgage broking, warning that the current system leaves aggregators blind to possible bad practices among new-to-broking credit representatives.

Numerous broking industry leaders have shared concerns with MPA amid an escalating home loan fraud scandal that has raised scrutiny of both mortgage brokers and banks’ direct introducer channels.

A suspected $1 billion worth of fraudulently obtained home loans, as initially reported by Commonwealth Bank in February, has since ballooned to a reported $3 billion as more banks dig into their records.

Amid ongoing investigations, suspicions are mounting that highly organised criminal networks are engaging in money laundering activities, using falsified information to get home loans approved.

Broking industry leaders are concerned about the lack of transparency surrounding ex-bankers moving into the broking profession.

One expert described a pattern where bankers involved in questionable practices at a lender leave the bank and then re‑emerge as brokers, often setting up the same kinds of models and behaviours outside the bank.

A disjointed credit rep system

In Australia, not every professional working in a bank needs their own Credit Representative Number (CRN).

For most bankers – such as branch staff, relationship managers or those who provide general information on products – their activities are carried out under the bank’s own licences. As a result, they are typically not required to obtain an individual CRN.

A CRN becomes relevant when an individual or business is formally appointed as a credit representative of an Australian Credit Licence (ACL) holder under the National Consumer Credit Protection Act 2009. This is the common approach seen in mortgage broking, where a broker operates under the ACL of a mortgage aggregator.

In these situations, the person is not technically an employee (despite Revenue NSW’s controversial application of the payroll tax). Instead, they are acting in their own capacity under the umbrella of another organisation’s ACL.

To make that arrangement transparent and properly regulated, they must be appointed as a credit representative and issued with a CRN, which is then recorded on Australian Securities and Investments Commission (ASIC)’s public register.

By contrast, employees of banks operate under the institution’s ACL and, where relevant, its Australian Financial Services Licence (AFSL). The bank holds the licence, sets accreditation and compliance standards, and is responsible for ensuring staff meet regulatory requirements. Because of this, individual staff are generally not separately listed with their own CRN.

Practically, this means an in‑house banker at a major institution – whether in a branch or internal lending role – will usually not need a personal CRN. A mortgage broker or external credit adviser, on the other hand, must either hold an ACL themselves or be appointed as a credit representative of an ACL holder, in which case they will have a CRN.

Is it time to unify this disjointed system?

Fixing the information disparity

The concept of individuals having a unique identifier was raised during the Royal Commission, noted Daniel Oh (pictured, below), group legal counsel at mortgage aggregator Connective.

Oh argued the solution was straightforward in principle: extend the credit rep number (CRN) framework that already applies to brokers to bank employees and ACL directors.

“If you're an employee of a bank, you should get your own number, and rather than that number change every time you operate under a different license, that should follow you through,” said Oh.

A further gap is aggregators' lack of access to the Australian Banking Association (ABA)'s list of terminated bank employees (specifically, the Banking Industry Conduct Background Check Protocol). “That would be an amazing resource to get hold of,” said Oh. "If they’ve been kicked out of the banking industry, they shouldn't be part of the broking industry, should they?"

Connective currently screens its broker network against ASIC’s banned and disqualified register, but Oh said broader access would strengthen oversight considerably.

While he acknowledged the obstacles around data privacy, “fixing this information disparity would be amazing”.

Aggregators must be diligent

As the intermediaries between brokers and lenders, aggregators play a central role in gatekeeping the broking industry.

This means their governance and due diligence processes must be watertight. When onboarding new brokers, it is standard practice to conduct police checks to identify any prior criminal behaviour that could disqualify them from working as a broker.

Unfortunately, no system is ever foolproof – especially when lines of communication between banks, brokers and regulators are weaker than they should be.

Mortgage aggregator Finsure found itself the subject of bad press this week when the Australian Financial Review reported that brokers within its network were implicated in potential home loan fraud.

It wouldn’t be the first time for brokers operating under Finsure’s ACL to come under fire.

In late 2024, Finsure terminated at least 26 brokers due to fraudulent activity.

In a letter seen by MPA and addressed to other mortgage aggregators and lenders in the interests of transparency, Finsure wrote: “It has come to our attention that there may be systemic fraud occurring by a syndicate of brokers. This has been identified through irregularities in loan submissions prompting an investigation into a number of brokers. The investigation has led Finsure to suspect that those identified below have engaged in fraudulent activities in residential mortgage loan applications.

“It appears that those involved are introducing new brokers into the industry who then submit loans with falsified employment and income details for the applicants.”

All implicated parties appeared to be connected to terminated Finsure broker Shameem Hossain of Talukder Mortgage Broking Pty Ltd, and Rajibul Islam, who was not listed as a Finsure broker. The letter was signed by Finsure’s current head of compliance and risk Samantha Wills.

Across multiple loan submissions, Finsure identified:

• false employment/income lodged with loan applications

• false income documents lodged with loan applications

• replicated income documents deemed to be false utilised by various members for differing customers and employment

• common employer for many of the applicants

“We have a whole compliance framework, we always approach broker fraud intensively, because we want to stamp it out. It's something that we take incredibly seriously, as every aggregator does,” a Finsure spokesperson told MPA.

Like others in the industry, the Finsure spokesperson noted that lenders do not always share knowledge of their former employees, which can impact the due diligence process. The spokesperson confirmed that police checks are part of Finsure’s onboarding process.

Stamping out the ‘bad dudes’

When onboarding brokers, accreditation outcomes can be a red flag. "If you can't get at least a chunk of the Big Five (CBA, ANZ, Westpac, NAB and Macquarie Bank) and a range of lenders, I don't know if we're comfortable having you operate under Connective's licence," Oh said. "I don't know how you can act in the best interest of a customer."

Connective has not experienced an uptick in calls from the banks’ governance teams, although Oh conceded that fraud is happening in the industry.

“Whether it's proprietary or broker… there are bad dudes out there and if they want to do bad things, they will find a way,” said Oh.