Bridging loan providers should use modern systems that can detect fraudulent applications

Leading on form our previous article last week concerning an attempted bridging loan application for £1.5 million that was a fraud. With increasingly clever attempts to commit fraud, bridging loan brokers have to be increasingly vigilant when dealing with new applications. It is very much anticipated that this problem will get worse throughout 2013 and beyond across bridging and other finance sectors.

Overall these types of thefts are widely considered to likely increase throughout 2013, due to the slow economic growth forecast for next year in addition to cut backs made to benefits. This is due to the Government looking for different ways to make cutbacks in order to reduce its expenditure and borrowing. Consequently more people are likely to be tempted by the money that can be obtained by committing frauds and other crimes such as shoplifting, which has also seen a recent increase.

Furthermore it is thought that more mortgage frauds are also likely to be committed. This is partly out of desperation to obtain mortgages where many people are unable to do so due to the tighter underwriting criteria in place since the economic downturn. These sorts of frauds will most likely involve applicants lying about their employment status and income, plus other false representations in order to hide poor credit histories.

People looking to commit frauds are helped by the vast resources available to them online where it is easy to find out details about peoples’ names, dates of birth and addresses. Other information that is easily obtained includes property details such as purchase price, valuation and details of any mortgages secured on the property. Modern day scanners and printers are also helpful and used to create false documents.

The reason why bridging loans are a popular target for the more serious fraudster is because they take advantage of the flexible underwriting criteria offered by the bridging lenders. This flexible approach can mean fewer checks which are designed to make the process of obtaining a bridging loan quicker. With fewer checks there are fewer opportunities for lenders to detect the fraud, making them a popular target.

Other easy targets that are proving to be a significant problem for the banks are credit and debit cards, and there has been a huge rise in the theft of money from accounts as criminals make unauthorised purchases and cash withdrawals using card and payment information that they have obtained.

Similarly insurance fraud costs the insurance industry millions every year. In an effort to fight and deter this crime insurance companies have been increasingly sharing information between themselves and other agencies. They are looking for people who are perhaps making false claims, and look at many factors to help identify insurance fraud. For example insurance investigators will look very carefully at someone who has made an above average amount of insurance claims or someone who is perhaps suffering financial hardship and an insurance claim suddenly being very helpful indeed. This of course is not to say that claims that may tick these boxes are false and fraudulent, it just lets investigators know which claims they should perhaps look especially close at.

More systems like this should be adopted within the bridging loan industry and lenders should share information amongst themselves. For example the team mentioned earlier who carried out a well thought out £1.5 million attempted fraud, were also in the process of carrying out a similar fraud from another finance provider. Another team of fraudsters successfully stole £300,000 from another bridging loan provider, but before they managed to do this they used the same plan against another lender and on this occasion failed. A security system operated between the different bridging lenders similar to that used by insurers, could well have prevented this £300,000 fraud.