cfi: nacfB


Fraud fight


In March of 2009 the NACFB set up the Fraud Intelligence Committee to investigate alleged cases of advance fee fraud. Has it been successful?


RecessionaRy Reasons foR fRaud


by


Adam Tyler, chief executive NACFB


As some of you may remember, last year in the pages of Mortgage Introducer the NACFB warned all brokers to take even greater care than usual when introducing business to a third party. Numerous reports were reaching our Exeter offices that various mortgage brokers had introduced their clients to a ‘broker’ or a ‘lender’ in good faith, only to have the client relieved of several thousand pounds worth of fees with no sign of any lending. As a result, the NACFB formed the Fraud Intelligence Committee to investigate cases reported to the Exeter office and, if appropriate, forward them to the relevant authorities.


The motivation was simple. One of the


main reasons the National Association of Commercial Finance Brokers had been formed in the first instance back in 1992, was to provide the SME sector of the UK with a group of specialist brokers that complied with a code of practice; and this was as a direct response to advance fee fraud. In addition, if the service level offered by a member fell short of the customer’s expectations, there was a body to which they could make representation and expect a thorough investigation into the conduct of that broker member. I would like to point out though, that there was only a single occurrence, where this occurred and after a short investigation, they were quickly expelled from the Association


46 mortgage introducer JULY 2010


But why have these practices resurfaced? The simple answer is that the recession and the reluctance of legitimate lenders to do any actual lending has meant that SMEs are desperate to find finance. And it is this desperation which makes them vulnerable to a ‘lender’ or ‘broker’ who promise that they can find the money they need - when even the most cursory of Google searches would reveal that this knight in shining armour has a reputation which looks distinctly tarnished. Not only that, but the credit crunch


itself provided a perfect smoke screen to the end result. It’s become the norm to have requests for finance turned down; everyone knows that because of the credit crunch lenders aren’t lending, so having a deal declined, even after significant fees have been paid up front, doesn’t always ring the alarm bells it should. Since the establishment of the Fraud Intelligence Committee, the fraud issue has been much higher up the agenda and the Association has been working hard to both raise awareness among the residential mortgage market to take great care when introducing clients to ‘commercial specialists’ (for the record, always use an NACFB broker member!), and to collate any evidence supplied by both brokers and their clients to forward on to the authorities to deal with. The hope was, with this two pronged approach, that awareness would mean that many brokers would deprive the fraudsters of oxygen by simply not forwarding business on to them. In the meantime the details of all those who had been unfortunate enough to fall victim would be collated and filed until there


was sufficient evidence to forward to the police, or the Serious Fraud Office, or whichever authority took interest. As the incidents reported to us


increased in number, certain names cropped up again and again and a clear pattern began to emerge. The scale of what appeared to be happening became quite a concern; at least in terms of the amount of money being handed over by SME clients, if not so much (thankfully) in terms of the number of alleged fraudsters. A log of all incidents was kept in preparation for any future enquiries and so we were able to try and steer any customer queries in the right direction.


next steps With the police and fraud authorities beginning to show more of an interest, one worry was that the FSA or Financial Ombudsman Service would want to take a closer look at the commercial finance industry as a whole. However I do feel it is important to point out that advance fee fraud is not a regulatory issue – it is a criminal one. This is not a case of brokers playing fast and loose with the rules, this about ignoring the rules altogether. It was important that NACFB brokers were not tainted by the activities of a few as experience showed that reputations take a long time to heal. Finally, after over 12 months of work, the National Fraud Authority is now investigating advance fee fraud in the commercial finance industry through the Action Fraud helpline. They have asked us to provide them with background information on the industry, and the records that we have kept over the last 12 to 18 months, with a view to carrying out their own investigation.


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