Westpac denies it ignored suspected RAMS home loan fraud

Samantha Aitken, Westpac’s current head of audit, risk, and compliance and former head of mortgages BCM, is saying that executives ignored her concerns about alleged fraud and criminal activity at some of the franchises of RAMS Home Loans between June 2022 and the start of 2023.

In a statement of claim lodged last year, seen by The Adviser, Aitken alleged suspicious activity included staged wages, document falsification, self-referral of clients, and using unaccredited or ‘grey’ listed referrers. This also allegedly implicated lenders employed directly by Westpac and its subsidiary, St.George Bank.

However, Westpac’s defence said “appropriate steps were taken in response to issues arising with the relevant RAMS franchises and matters were dealt with and escalated appropriately.”

What were the fraud allegations?

According to the allegations in the statement of claim, when in her role as head of mortgages BCM, Aitken said she warned Jake Bromwich (former managing director of RAMS and then-managing director of mortgages LOB), her immediate manager Richard Burton, Chris de Bruin (then-group executive of consumer and business banking), and David Ninnes (group head of accountability) about suspected fraud.

In June 2022, she had directed her team to review every loan application undertaken by a RAMS franchise to assess the veracity of each application and its supporting information, as well as ensure that the lender’s associated regulatory and legal obligations were being met.

The team also investigated a sample of loans approved by the RAMS franchise in the preceding two years.

As a result of the “enhanced monitoring protocols”, about 85 per cent of all new home loan applications thereafter received from the RAMS franchise were declined by the bank.

Moreoever, it was found that, in the preceding two to three years, a similar percentage of settled loans approved by the RAMS franchise should have either been investigated prior to approval, or otherwise declined, on the basis that they did not satisfy the lender’s regulatory or legal obligations, including due to suspected fraudulent or other criminal activity.

A number of other RAMS franchises were identified by Aitken and her team as “potentially engaging” in similar behaviour.

When requests to terminate the franchise agreements were allegedly denied, Aitken complained to her manager that the response had been inadequate.

Warning letters had been issued to individuals suspected of involvement in the concerning behaviour, but no other action was allegedly taken to redress the conduct.

Aitken therefore said that that there were “systemic deficiencies within the management, structure and leadership of RAMS that enabled multiple RAMS franchises to engage in fraud and other criminal activities” and that more franchises needed to be reviewed.

Aitken alleged she asked Burton in September 2022 if her team could apply enhanced monitoring protocols to a sample of Westpac’s first-party applications but was denied.

Instead, Westpac contended that the discussion with Burton focused on determining the “most appropriate places” for the monitoring based on risk factors and that the bank decided to initially apply resources to RAMS franchisees.

Aitken also claimed she asked Ninnes to conduct a review into RAMS for potential non-compliance with the banking executive accountability regime, a request she said was declined. Westpac denied this, saying that Aitken never made such a request.

Furthermore, Aitken alleged that in November 2022 she identified 18 RAMS franchises that presented regulatory, reputational, and legal risks to the bank and shared a memorandum setting out the issues to Burton.

In February 2023, Aitken allegedly met with the head of legal of mortgages and RAMS, Helen Van Ravels, to say that further information should be provided to an external law firm, including a report and other information produced and maintained by the risk team.

Aitken said she then attended a meeting with the general counsel of consumer, business, and specialist business, Nigel Bond, and the chief risk officer of consumer and business banking, Chris Green, who allegedly informed her they had determined no further information would be provided to the external law firm.

However, Westpac said it was agreed over email that “specific further information” would be provided to the external law firm.

The majority of Aitken’s claim focuses on HR/employment issues (as reported by our sister title, HR Leader), including that she was dismissed from her head of mortgages role by de Bruin after requesting the independent review into RAMS and disclosure of alleged fraudulent conduct to the board (a claim Westpac denied).

Aitken also said that she faced negative repercussions, including bullying and reduced bonuses, due to her whistleblowing activities.

Westpac, while admitting to not increasing her 2023 remuneration, said that she received a bonus that was $20,000 higher than the previous year “in recognition for the positive risk behaviour she demonstrated in the preceding year”.

The Aitken case will continue into mediation until the end of April, with a case management hearing scheduled for 5 May.

RAMS faces ongoing scrutiny

The concerns raised around alleged fraud at RAMS are the latest in a litany of ongoing issues for the beleaguered franchise.

Westpac closed local RAMS centres last August and no longer accepts new applications for home financing.

Last year, Westpac said that it had “enagement with various regulators in relation to RAMS”, including an enforcement investigations by the Australian Securities and Investments Commission (ASIC) into RAMS Financial Group and RAMS-authorised credit representatives (including RAMS franchisees in connection with the provision of home loan products from 1 January 2019 to 1 September 2023).

The focus of ASIC’s investigation is on RAMS’s general conduct obligations, prohibitions on conducting business with unlicensed persons, and giving misleading information.

Other regulatory investigations reportedly include “inquiries by ASIC into principal, interest and fee repayment calculations in relation to certain business lending products”.

Westpac told The Adviser at the time: “Westpac self-reported to ASIC after identifying issues in some home loan applications through its risk review processes.

“We have taken a range of actions to strengthen these processes and have exited franchisees where necessary in accordance with their contractual arrangements.

“We will continue to cooperate with regulators on this matter.”

A class action was also filed in the Federal Court last year by former RAMS franchisees who were terminated by the Westpac-owned brand, contending they were let go without basis.

The class action – filed by Morris Mennilli Lawyers on behalf of certain former RAMS franchisees – has come about after RAMS allegedly terminated the authorised credit representative agreements and franchise agreements held by around 20 franchisees last year. This is believed to be about a third of the entire network size.

[Related: Westpac axes RAMS]