Lender proposes minimum standard for anti-fraud checks

Lender proposes minimum standard for anti-fraud checks


Leading on from B&C’s The Big Fraud Fight – Lenders’ vetting measures article published last week, we got in touch with Colin Sanders, Chief Executive Officer at Omni Capital, to get a more detailed understanding of their systems and other key questions surrounding fraud in the short-term sector…

B&C: Is fraud a problem in the short-term sector?

While not endemic or a wide-scale problem at the moment, it has the potential to become so if we allow our guard to drop.

There is a misguided perception that short-term lenders are less vigilant and robust than their mainstream counterparts when deterring or detecting attempts to defraud. This view probably dates from the past when it may have held a grain of truth. Yet, this has not deterred a minority of ‘chancers’ who think the sector is still wide open to abuse.

The answer to the problem is on-going vigilance and the judicious application of robust due diligence processes. There is also a strong case for far more effective cross-industry data sharing and co-operation.

B&C: What systems do you have in place to help you detect fraud?

At Omni Capital, we deploy a range of anti-fraud measures. These include anti-money laundering and Know Your Customer (KYC) checks. We insist on ID and address documentation certified as accurate by the applicant’s solicitor. We also use ‘Veriphy’, an industry-recognised electronic verification system that carries out ID and other necessary background checks.

Additionally, we only instruct valuers from our approved panel, and we take time to ensure the applicant’s solicitors are appropriately qualified and fit to practice. As an extra measure, we insist on the solicitor’s practice comprising a minimum of two partners.

Finally, but importantly, we place great stock in the experience, common-sense, skill and alertness of our underwriters, all of whom have been hand-picked for these very qualities.

B&C: What measures do you take when checking out brokers, valuations and solicitors?

We distribute through a limited number of brokers and packagers. Each is well-known to us and enjoys considerable standing and reputation in the industry.

Valuations are only accepted from valuers on our published preferred panel [Knight Frank, Savills and De Villiers].

Solicitors must be suitably qualified and currently practising as verified by checks with the Law Society. We also insist that the solicitor’s practice comprises a minimum of two partners, and would expect it to be geographically close to the applicant’s area of abode.

We would like to participate in CIFAS but are prevented from doing so at the moment. This is because of CIFAS’ Rule of Reciprocity whereby a lender may only receive information in exchange for their own propriety information. Understandably, this is subject to a strictly-audited minimum amount of data which, because of our relative newness as a lender, we cannot presently supply.

B&C: Have you flagged any fraudulent applications to the authorities?

To date, we haven’t. We’ve seen a small number of cases containing elements of concern, but all failed to proceed beyond early enquiry stage. I’d like to think our probing questions and due diligence processes had an influence on this.

B&C: What are the common 'scams'?

Whether deliberately or in error, some applicants encountered by us have falsely claimed ownership of property. Others have failed to disclose existing mortgage obligations.

Such material falsehoods always surprise me. It may be there are a small number of people out there who continue to see modern short-term lending as wide open to abuse. If so, I’d like to think that they and their collaborators are in for a nasty shock.

B&C: Is there sufficient information sharing for fraud prevention purposes in the short-term sector?

There is more that could be done in this regard, and both lenders and trade bodies have their full part to play.

I believe this deficiency is recognised by the key players. The cause is less one of apathy or indifference than one of logistics created by the huge spurt we’ve seen the sector take. In such circumstances, the ‘back-office’ often lacks behind. But we mustn’t be complacent, and the structures now exist to take forward far closer and more effective co-operation.

B&C: What could the industry do better to crack down on fraudsters?

Better information sharing for a start. Our very able trade bodies have a vital role in facilitating this by creating the suitable forums and other means of communication. But for it to work fully and effectively, lenders must overcome any reticence to share what may be perceived as ‘sensitive’ data.

There may also be a role for the trade bodies in helping devise a minimum set of standards for lenders regarding anti-fraud checks. But this could not, of course, be at a cost to lenders’ rights and ability to make their own underwriting and lending decisions.

I wonder too if it might be possible to negotiate more flexible terms of entry for short-term lenders with industry bodies such as CIFAS?

B&C: Would regulation of short-term lending help minimise fraud risks?

Not in itself as I don’t believe formal regulation will add significantly to the prudent, robust and effective measures already deployed by most responsible short-term lenders. After all, none of us are in business to lose money!

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