Financial Markets Authority to crack down on bankers and advisers amid uptick in mortgage fraud

Financial Markets Authority chief executive Samantha Barrass says there are often more instances of fraud during tough economic times. Photo / Dean Purcell.

The Financial Markets Authority is cracking down on advisers, lawyers and bankers committing mortgage fraud.

The regulator has observed an increase in instances of falsified documents being used to obtain mortgages.

Speaking to the Herald, the FMA’s chief executive Samantha Barrass said there were both individuals acting in isolation, as well as those working in more organised groups.

“There will be insiders in institutions that are supporting this type of fraud,” she said.

In April, the FMA said it had filed criminal charges against a former financial adviser, Prem Gounder, who it alleged used a false gifting certificate in support of a home application submitted on behalf of a client.

The FMA said it was also investigating people associated with Gounder.

Barrass said it was typical to see more instances of fraud during tough economic times.

Mortgage fraud was just one of the areas the FMA said it would focus on over the next year in its just-released Financial Conduct Report.

It said it would also focus on life and health insurance products being sold to consumers through misleading or fraudulent activities.

“We have seen advisers taking advantage of new migrants’ lack of understanding of what products they need, including advisers from within their own communities,” the FMA said in its report.

Another issue it identified was wholesale issuers making false or misleading disclosures to potential investors.

“We continue to see a significant number of wholesale offers that contain false, misleading or unsubstantiated information, particularly in their advertising,” it said.

“We are seeing wholesale offers being widely marketed, via both traditional and social media. This use of broader advertising channels means greater potential for less-sophisticated investors to be attracted to offers that are unsuitable for their needs.

“There is a heightened risk that investors cannot make well-informed decisions and obtain suitable investment products because of false, misleading or unsubstantiated disclosure.”

The FMA’s Financial Conduct Report identified other areas the regulator would focus on over the year.

It did not provide any data to support its comments around the misconduct or fraudulent activity it was seeing.

Jenée Tibshraeny is the Herald’s Wellington business editor, based in the parliamentary press gallery. She specialises in Government and Reserve Bank policymaking, economics and banking.