Brokers warned to spot 5 red flags of fraud

Brokers warned to spot 5 red flags of fraud



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Following recent news that FSA fines have increased by 514% in the last year – with small brokers bearing the brunt of the trigger-happy banning and fining – it is now clear that advisers must be more vigilant than ever when it comes to fraud. 

Manchester-based bridging finance firm Lowry Capital believe that bridging lenders are best placed to help brokers look out for suspicious deals, as the short term finance sector is often targeted by fraudsters who see it as “an easy option.”

 

“Because we’re not mainstream lenders and we provide specialist funding that can be arranged much more quickly than a typical loan, fraudsters tend to think that we don’t run as many checks or that we’re not as scrupulous.” Jonathan Caplan from Lowry Capital commented. “In actual fact, the opposite is true. Because we lend large amounts of money over such a short period of time, we have to make absolutely sure that the deal we’re lending on is genuine and that there is a real exit route in place.”

 

Therefore, Lowry Capital have highlighted five red flags that brokers should look out for when a bridging case lands on their desk. Although these points don’t automatically indicate fraud, brokers have been warned to be aware when coming across them:

 

  • Private sales – “We’ve heard of cases where a fraudster finds an unencumbered property, steals the vendor’s identity and then sells the property to a friend. The friend will then approach a broker in order to get finance to pay back the fraudster.” Mr Caplan confirms. “There’s often a lack of clarity in private sales and brokers must be cautious of this.”

  

  • Client says that solicitor is holding the deposit – “This can be suspect and the broker should definitely find out if there’s a credible reason for it.”

 

  • The deposit is being paid direct to vendor – “Again, is there a credible reason why someone is willing to pay a large amount of money to a vendor without their solicitor knowing? There’s no protection and that should ring alarm bells.”  

 

  • There’s a large, unexplained discount off the purchase price – “This can be a classic way of money laundering.” Mr Caplan says. “And in my experience of seeing attempted fraud, fraudsters will try and make the deal as appealing as possible to increase its chances of going through.”

 

  • The vendor owes the purchaser money – “This can also be a way of money laundering and the broker must ask for confirmation or proof of the money owed to ensure everything is above board.” 

 

If any of these boxes are ticked, or something feels suspicious, Lowry Capital recommend always asking for proof of deposit in an original bank statement, or if in doubt, checking an original Inland Revenue bill.

 

Finally, don’t ignore your gut instinct. “If you find yourself asking why this person even needs a bridging loan, or if it just looks too good to be true, then something may be amiss and more information is needed.” Mr Caplan concluded.

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