AUSTRAC has uncovered suspected coordinated mortgage fraud involving potentially hundreds of millions of dollars in loans across 10 major Australian banks.

The findings came from Operation Claw, which analysed data from the participating banks through AUSTRAC’s Fintel Alliance.

Most of the suspected fraudulent loans were linked to properties in Sydney.

The suspected cases involved inflated incomes, misrepresented employment and fabricated or unverifiable business activity used to support loan applications.

Investigators also identified instances where offshore or third-party funds were used to complete property settlements and make mortgage repayments.

The activity was not limited to one lender or borrower group.

Common warning signs included false or misleading documents and the repeated involvement of the same mortgage brokers, accountants and law firms across multiple applications.

Weaknesses Found Across the Lending Sector

AUSTRAC CEO Brendan Thomas said,

“The scale of this activity should be a wake-up call for every lender. The same warning signs were found across banks that together cover the vast majority of Australia’s mortgage market.

While this project did not identify evidence of widespread money laundering, the weaknesses it exposed could be exploited by criminals seeking to abuse Australia’s financial system.”

Fintel Alliance has provided the names of individuals and entities potentially involved in submitting false documents in support of loan applications to law enforcement and regulatory agencies for intelligence purposes.

The agencies include the Australian Securities and Investments Commission, Australian Taxation Office and Tax Practitioners Board.

Participating banks have used the intelligence to investigate potentially fraudulent loans, strengthen controls and refer suspicious activity to the relevant authorities.

Some banking relationships have been ended, with further action expected.

AUSTRAC Calls for Stronger Checks

AUSTRAC has urged mortgage lenders across Australia to examine their loan portfolios for signs of fraud, report suspicious activity and strengthen controls before approving applications.

“The most effective way to stop mortgage fraud is before a loan is approved. Once a loan is established and the funds have moved, recovering the money becomes significantly harder.

Lenders need to actively look for these warning signs, strengthen their controls and report suspicious activity to AUSTRAC. This is not something any institution can afford to ignore.”

Thomas said.

AUSTRAC has worked with participating banks to identify controls for preventing and detecting mortgage fraud.

It has also issued threat alerts outlining indicators to support risk assessments and improve reporting.

Operation Claw involved Australian banks, the Australian Taxation Office, NSW Police Force, NSW Crime Commission, Australian Criminal Intelligence Commission, Australian Prudential Regulation Authority and Australian Securities and Investments Commission.

Featured image: Edited by Fintech News Australia, based on image by rawintanpin via Magnific