The FCA has banned two brokers for their part in the submission of several fraudulent mortgage applications.

Douglas Jones and his son Derek, both directors at Glasgow-based mortgage brokerage Which Mortgage Limited, have both been banned from being involved with the running of any other firms.

Douglas Jones was handed a fine of £13,300, while his son Derek was given a £11,200 sanction, before the Authority withdrew the penalty in light of evidence that Mr Jones would be caused serious financial hardship as a result.

An FCA investigation into the pair’s business practises discovered that a number of false payslips were used in a number of mortgage transactions, leading lenders to overestimate the suitability of applicants to the loans they were borrowing.

A high street lender raised its concerns to the regulator after its underwriters discovered that information on a submitted payslip was false.

The lender in question rejected the application instantly and removed Which Mortgage from its panel of introducers, before reporting the firm and both directors to the Authority.

The FCA then launched an enquiry into 38 client files, of which 11 were in an identical standard format even though each applicant worked for a different employer.

After the watchdog approached HMRC for more information pertaining to the 11 applications, it was discovered that each payslip contained false information about both the clients’ income and employment.

Moreover, it was only applications submitted by the directors of the firm which were found to contain incorrect information; those submitted by other advisers at the company were not found to be defective.

It later transpired that prior to the FCA’s initial review of the firm’s files, Mr Douglas Jones was reported to have replaced the fraudulent payslips with templates downloaded from the internet.

Mr Jones then filled in the clients’ correct information except their current wages, which he updated to make sure that they would make suitable mortgage applicants.

In one instance, a client intended to borrower £121,000 to purchase a property valued at £142,500.

His application contained a supporting payslip which stated that he earned £33,000 per year, though which was in the same format as the 10 other files identified by the FCA.

HMRC records showed that the borrowers actual income for the relevant year was, in fact, £12,532.

Mr Jones’ explanation for his conduct what that he had tried “to maybe try and hide an embarrassment”.

He added that payslips had been replaced before the Authority’s visit to Which Mortgage to disguise that the firm “had likely been duped by its clients”, lacking the appropriate systems and controls to prevent financial crime.

He added that he regretted his actions which he realised had been “extremely naïve and incomprehensible.”

The regulator’s final notice for the pair, published today, bans both men from “performing any function in relation to any regulated activities carried on by any authorised or exempt person, or exempt professional firm on the basis that he is not a fit and proper person because he lacks competence and capability.”

The order takes effect from the 29 April 2013.