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The financial services regulator has revealed that it is to release a major publication on loan fraud next month, which will also provide guidance to industry on best practice to reduce fraud.
In an update on its work following the banking royal commission, the Australian Securities and Investments Commission (ASIC) outlined its work and planned actions in relation to the recommendations and areas of concern identified by the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry.
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Court cases and investigations underway
The regulator revealed that it currently has 13 investigations underway following referral from the royal commission, with one in litigation, along with 29 investigations underway following the case studies that were brought forward during the commission.
Four of these investigations are matters before the court (Select AFSL, Dover and two matters relating to NAB), while another two matters are being considered by the Commonwealth Director of Public Prosecutions (CDPP) for potential criminal action, it revealed.
“As at 31 July 2019, within this dedicated enforcement program, there were 88 enforcement investigations and 17 court actions underway. Of these, 86 relate to the major banks and AMP, and their subsidiaries.
“In addition, 59 individuals are the subject of investigation and eight individuals were the subject of court action. A total of 82 outcomes had been achieved, including criminal, civil and administrative actions, and court enforceable undertakings,” ASIC outlined in its update.
It added that it is “seeking to expedite the finalisation of all enforcement matters through the strategic use of the increased funding from government”.
Loan fraud report expected in October
Notably, the update outlines that ASIC will be releasing a loan fraud report in October.
This report aims to “understand what industry participants do to protect themselves from loan fraud and give guidance to industry on best practice”.
This builds on work that ASIC said it was targeting last year, when it highlighted it had been undertaking an “important volume of work in and around responsible lending”, noting several cases brought to the courts recently, including Westpac’s alleged failure to assess borrower living expenses and ANZ’s failure to recognise fraudulent car loans.
Speaking in relation to loan fraud in October 2018, the corporate regulator noted that it was particularly interested in stamping out fraud within the banks.
Michael Saadat, the senior executive leader for deposit takers, credit and insurers (who has announced he would leave the regulator to head up public policy and regulatory affairs at AfterPay in November) said last year that ASIC is “undertaking a broader review of loan fraud to understand what the industry is doing to prevent and detect loan fraud”, adding that while customer-related loan fraud “could be happening”, the regulator’s focus at the moment is on the corporations – but the broker market, too.
“The conduct that we’re focused on is when the broker or bank officer is implicated in that conduct,” Mr Saadat said.
As well as releasing a loan fraud report, ASIC also confirmed in its update that it would be publishing revised guidance on responsible lending (Updated RG 209) “by the end of 2019”, following its consultation and hearings on the matter and “issue a report responding to issues raised in submissions.
The regulator revealed earlier this week that it would also be appealing the recent court judgement relating to Westpac’s reliance on the HEM benchmark in home loan applications.
[Related: ASIC to undertake new loan fraud project]
