The secured loan sector has transformed itself and thanks to MCD can hold its head up as a very real alternative to remortgaging as a method of capital raising. Yet we are still behind the curve when it comes to some of our practices to prove the identities of those for whom we aim to provide finance.
We are living in an era where fraud and particularly identity fraud has become a clear and present danger. Cases of identity fraud have been recorded last year at 173,000 cases.
How many of your clients are personally known to you? I would guess less than 10% on average. We all naturally assume that the person we are talking to is who he or she says they are. To back up applications, copies are made of passports, driving licences, and utility bills to prove identity and residence and yet how do we know that the originals are real or fake?
Lenders, particularly in the second charge market rely on master brokers and other packaging partners to provide evidence as to the identity of applicants – usually by certifying copies of essential ID documents – and yet while as advisers and introducers, everyone provides what is required, the days of physically looking at and making a copy of a document such as a driving licence or passport are surely numbered?
Sophisticated fraudsters produce documents that to the naked eye are exactly like the real thing and yet the industry is still largely relaxed in accepting signed copies to prove identity.
Last year at Fluent, having been affected by a large fraud because of fraudulent ID, we invested in a state of the art ID scanning solution. The technology from TrustID Ltd, a leading provider of scanning software, is used to check documents confirming identity requested by lenders. Without it, we may have unwittingly allowed a fraud to take place.
The latest one we were dealing with was an application for a secured loan for £40,000. All the usual checks were fine. That is, until we checked the applicant’s driving licence with the scanner. It was a fake.
Every original document we receive is now scanned to authenticate documents’ security features – both visible and hidden. The machine reads and stores the printed information on the face of the documents, compares chip and machine readable zone data within passports, driving licenses, visas and identity cards and takes infrared scans of these documents.
All of us, including brokers, master brokers, packagers and lenders need to be increasingly vigilant. It is everyone’s responsibility to be on guard against fraudsters. The old checks and balances are not enough in a 21st century market and modern methods of checking identity should be part of the criteria requested of their partner introducers by every lender.
Jeff Davidson is head of intermediaries at Fluent for Advisers