ANZ, Westpac, Macquarie, NAB reportedly working with authorities to determine extent of fraudulent mortgage submissions
More banks are being roped into a home loan fraud scandal that could be at least twice as severe as previously suggested.
According to an AFR article citing “two people briefed on the internal investigation but not authorised to speak on the record”, Westpac, ANZ, NAB and Macquarie are reportedly working with the financial crimes watchdog to determine the extent of fraudulent home loans on their books.
It comes a few short weeks after Commonwealth Bank, Australia’s largest home lender, proactively reported itself to the authorities after uncovering a suspected $1 billion of home loan fraud on its books, including potentially doctored applications using AI-generated information.
A CBA spokesperson at the time said the home loan fraud “is an industry-wide challenge, with fraud being attempted through mortgage broking and referral channels”.
The industry-wide nature of the issue appears to be true – both NAB and Bendigo and Adelaide Bank confirmed to the AFR that they are working with AUSTRAC to investigate home loan fraud.
The mortgage industry is contending with “a heightened and sophisticated fraud environment… These risks are not confined to any one institution”, a NAB spokesperson told AFR.
Sources suggest the fraudulent home loans at these banks could be worth another $1 billion.
MPA has reached out to ANZ, NAB, Westpac and Macquarie for a statement.
Referrer programs under scrutiny
Amid the escalating home loan fraud scandal, banks’ referrer programs have come under the spotlight.
CBA has reportedly raised concerns that its introducer program – which gives third parties such as real estate agents, accountants and other professionals a commission if they refer a client to the bank – is subject to compliance failures and potential fraud.
Not all major banks run referrer programs.
Following regulatory scrutiny and the Royal Commission, NAB announced it was ending referral payments and discontinuing its introducer scheme around 2019. The following year, NAB was fined $15 million after ASIC uncovered misconduct in its referrer program between 2013 and 2016.
In 2021, ASIC commenced proceedings against ANZ over its home loan introducer program, alleging that the bank “breached consumer protection credit laws by accepting customer information and documents from introducers and other unlicensed individuals when this was not allowed”.
ASIC warned of a prevalence of false consumer information in these introducer programs, which may lead consumers to take larger loans than they can afford.
Westpac and ANZ continue to operate their referrer programs.
Broking industry cites ‘longstanding concerns’
The broking industry has also criticised these referrer programs.
Anja Pannek, chief executive of the Mortgage and Finance Association of Australia (MFAA), believes the financial incentive of these programs deserve scrutiny.
There are “longstanding concerns regarding the risks that can emerge in large-scale paid lender referral programs”, said Pannek. She also criticised the lack of regulatory guardrails governing these sorts of introducer programs.
In contrast, Pannek highlighted the high level of consumer protections inherent in the mortgage broking industry.
“Mortgage brokers operate within a comprehensive regulatory framework that includes strict licensing requirements, the best interests duty, regulated remuneration arrangements, education and professional standards, and mandatory membership of the Australian Financial Complaints Authority,” said Pannek.
