Fraud: The tell-tale signs

Fraud: The tell-tale signs




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Fraud is certainly a hot topic within the bridging industry at the moment. Bridging and Commercial spoke to Richard Deacon, the Sales and Marketing Director at Masthaven, to try to ascertain what signs to look out for when dealing with potentially fraudulent cases.

I get the impression would-be fraudsters have seen the increased usage of bridging finance and are looking at ways of exploiting the system. As someone who deals with the front end of the loan process I see more and more enquiries that could potentially be fraudulent cases and always have one eye on them to sense check the deal.

There are no hard and fast rules with regards to fraudulent bridging cases, but one does have to be vigilant in every dealing with the introducer. There are often many different layers to the introduction of a bridging loan, so if you can strip away these layers as much as possible and deal directly with the introducing broker or (ideally) the client, then you can start to negate the potential of fraudulent cases.

Masthaven insist on speaking to the client at varying stages of the loan process to help fight this potential threat and also to satisfy our FSA regulatory obligations. It is often eye opening when a week into a deal the client receives a phone call from us and has little real knowledge of what is going on, even though they may have paid valuation and legal costs.

When discussing a case with a potential introducer you must be sure the case makes sense. Is the money easy to follow? By that I mean are the proceeds of the loan being used for a purchase? If so, then it is pretty straightforward to assess the risk of the deal as you can always insist on taking a charge over the property that the money is being raised to purchase.

If the case has any adverse overtones to it, then again, it is quite straight forward to assess the validity of the application – provided there is proof from the client as to where the funds are being used. Many lenders insist on getting settlement figures directly from the client’s creditors so that there is no capital raising on the loan itself to dissuade fraudulent activity.

You really need to sit up and take notice when money is not being used for a straightforward transaction. Typically, when money is going overseas for a property purchase or acquisition of goods you need to tread carefully. With due diligence you can make the relevant checks yourself when these types of deals are in the offing, but many of the deals highlight the need for speed. Because of this, you could end up in the trap of getting the deal done in the timescales required, or getting the checks in place first to spot the potential fraud and maybe missing the deal deadline. Remember, the fraudster wants you to do as few checks as possible and will always ask you if there is any way round any potential hurdles as he needs to complete quickly.

Fraud isn’t a dirty word. It can be used as a case study in training sessions, to keep every member of staff on their toes and highlight any shortfall in your operating procedures. Always be vigilant, and don’t be shy of asking those questions they don’t want to be asked.

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