Financial crime is a serious issue and one that brokers need to take every reasonable step to detect and prevent. Financial crime encompasses a wide range of illegal activities carried out with the intention of making financial gain including fraud and money laundering.
Our best-in-class compliance function works hand in hand with our brokers and funders to provide education and robust processes to detect and prevent financial crime at every turn, ensuring our brokers run their businesses efficiently and compliantly within UK laws and regulations.
One of the most common forms of financial crime that brokers may encounter is identity theft or falsification. This occurs when a fraudster steals personal information, such as a customer’s name, address and financial details, to fraudulently apply for credit or make a transaction. According to recent statistics from the UK’s national fraud and cybercrime reporting centre, Action Fraud, identity theft accounted for over 60% of all reported fraud cases in the financial services sector in the past year.
Brokers should be vigilant in verifying the identity of their customers and conducting thorough due diligence checks on new clients to ensure they are legitimate. It is advised to pay particular care with leads generated via digital methods as the distance created by dealing with someone online makes it harder to verify their true identity. By extension, the BBC recently reported on the worrying rise of AI powered financial crime (see full article here https://www.bbc.co.uk/news/articles/c988v355e8do).
Once they have receipt of a prospect or customers brokers should take every measure they can to protect it, ensuring only essential data is held, that it not held for longer than necessary and that it is managed and processed securely, to avoid becoming a weak link in the security chain.
It is not only the applicant that can be fraudulent, but sometimes applications can also be made for a purpose or loan type for which the individual does not qualify. During the Covid crisis the CBILs/BBILS loan schemes provided a lifeline to many small businesses but also an opportunity for unscrupulous individuals to take advantage of this help resulting in an estimated £1.1bn of fraudulent transactions being drawn (https://www.gov.uk/government/publications/covid-19-loan-guarantee-schemes-repayment-data/bounce-back-loan-scheme-performance-data-as-at-31-july-2022). To spot potential loan fraud, brokers should carefully review all loan applications and documentation for any inconsistencies or red flags, including incomplete information.
In a bid to crack down on financial crime, the FCA has established a robust plan, whilst mainly aimed at consumer finance, there are notable impacts on businesses finance and brokers should be aware of the additional verification measures that are coming in on the advertising of their services through paid social media campaigns. With LinkedIn paid ads becoming the most recent platform to adopt this process.
As well as protecting against identity theft and loan fraud, brokers should also be on the lookout for other forms of financial crime, such as money laundering. By staying informed about the latest trends in finance crime and regularly updating their knowledge of fraud prevention techniques, brokers can effectively safeguard themselves and their customers from falling victim to financial fraud.
Financial crime is a serious threat to the asset and commercial finance industry which undoubtedly cannot be ignored. But by taking proactive steps to protect against identity theft, loan fraud and other forms of wrongdoing, brokers can effectively defend themselves and their clients.
