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FSA fines mortgage firm for failing to prevent fraud and bans partner

The FSA has fined a Northern Ireland mortgage firm £35,000 and banned one of its partners for failures which led to at least 16 fraudulent applications being submitted.

James Ian Shanks, a former partner and mortgage adviser at County Down mortgage intermediary Case Funding Centre, has been banned for recklessly submitting false information to lenders.

During its investigation the FSA found that CFC did not have adequate systems and controls in place to counter the risk of customers and staff submitting mortgage applications based on false income and employment information.  

It also found that advisers did little more than superficial ‘sense checks’ on mortgage applicants’ income and employment details.

The FSA says these failings, combined with CFC’s historically weak recruitment process, led the regulator to conclude that the firm had exposed itself to the risk of being used to facilitate financial crime.

In addition, Shanks was shown to have submitted mortgage applications from CFC’s advisers containing income information that he failed to verify against the firm’s records, despite being aware that such a check was possible.

FSA director of enforcement and financial crime division Margaret Cole says: “We expect all authorised firms, including lenders, to take the necessary steps to stop their businesses from being used to commit crime.  

“Both Case Funding Centre and Shanks fell short of the standards we expect and they are being punished for their failings. We will continue to take action against any firm or individual who present a risk to our objectives of reducing financial crime and maintaining market confidence.”

The FSA says CFC and Shanks co-operated fully with the FSA during the investigation and agreed to settle at an early stage, which qualified the firm for a 30 per cent discount to the proposed penalty of £50,000.

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Comments

There are 11 comments at the moment, we would love to hear your opinion too.

  1. Discounts on fines “for failures which led to at least 16 fraudulent applications being submitted”. What is going on?

  2. A small mortgage broker submits16 cases where income was overstated and the firm failed to “verify [income] against the firm’s records, despite being aware that such a check was possible”. Consequences, A partner is banned and the firm fined £35,000.

    A large Brittish bank oversees hundreds of thousands of mortgage applications where income was not properly checked, and the loan not properly underwiritten, despite being aware that such checks were possible. Subsequently, the mortgages were securitised and missold to other banks, the banking system almost collpased, the bank becomes insolvenet and billions of pounds of taxpayer monies were used to bail out the bank which is now 87% owned by the taxpayer. Consquences? No fines, no bans, no personal liablity for the chief executive or any other persons responsible for compliance oversight. Instead a massive pension payout is approved by the Board on the resignation of the CEO.

  3. This firm is well known for having a bit of a reputation in the mortgage market and is now under a new name and Mr Shanks wife as one of the directors signed of by the FSA. The FSA need to be tougher.

  4. Gradually, the FSA, OFT, etc etc etc want all the small boys to “disappear” and leave the banks to cream off everythings including the cream – Do you how this would be done? By template based selling! If the template fits on the customer’s head then SELL, SELL, SELL otherwise keep away! This will undoubtly create underclass who will resort to the COWBOYS and there are lot out there! It is the customer who will pay in the end!! Good work those at FSA, OFT, VIP, SOF etc

  5. Anonymous of 7th Jan hit the nail on the head

  6. ‘Anonymous | 7 Jan 2010 1:44 pm’

    Superb post.

  7. If you knew the Firm you would know that got off lightly! How they lasted so long is a mystery!

  8. The banks get away with murder. At a Chamber of Commerce Meeting in 2007 we had a Member of the Cabinet, a Senior Manager from the bank of England and several other luminaries. I asked what do you have to say about?

    Banks lending 5 times (and more) salaries

    100% to 120% mortgages

    I also stated that the large percentage rise in house prices every year helped to justify these dangerous ratio’s.

    I asked what happens when the market adjusts and then crashes. Normally house prices increase at the same rate as average earnings index. The house prices were running miles ahead of this index which would suggest we were heading for trouble.

    The people on the stage muttered and eventually the politician picked up the baton
    and waffled on about nothing. Something they are very good at doing. They did not answer my question.

    The rest, as they say, is history. Why did the FSA not ban these bank Directors for their mis selling and the large bonus’s they were pocketing for reckless lending.

  9. I note the FSA concluded this firm “had exposed itself to the ‘risk’ of being used to facilitate financial crime”. They could not have found any actual evidence of this otherwise it would have been mentioned as part of the ‘rap sheet’.

    Obviously the regulator has other undeclared agenda’s, as other excellent posts have already mentioned.

    It is also interesting that the FSA demands that ALL firms must give total co-operation and openness in all their dealings with the regulator but when firms have the temerity ask the FSA perfectly legitimate questions they are refused information with claims that the Data Protection Act prevents most information from being divulged and that most other information normally available under the FOI Act is subject to what appear to be blanket exemptions, until you speak to the Data Commissioners Office! All this to protect it’s own records from scrutiny in a culture of secrecy designed to protect the FSA from all criticism.

    It would be much more honest if the regulator lived by the same standards it seeks to impose on regulated firms but it is a case of ‘do as I say not as I do’.

  10. A small mortgage broker submits16 cases where income was overstated and the firm failed to “verify [income] against the firm’s records, despite being aware that such a check was possible”. Consequences, A partner is banned and the firm fined £35,000.

    A large Brittish bank oversees hundreds of thousands of mortgage applications where income was not properly checked, and the loan not properly underwiritten, despite being aware that such checks were possible. Subsequently, the mortgages were securitised and missold to other banks, the banking system almost collpased, the bank becomes insolvenet and billions of pounds of taxpayer monies were used to bail out the bank which is now 87% owned by the taxpayer. Consquences? No fines, no bans, no personal liablity for the chief executive or any other persons responsible for compliance oversight. Instead a massive pension payout is approved by the Board on the resignation of the CEO.

  11. Did I read thw quote from Margaret Cole properly?

    “Both Case Funding Centre and Shanks fell short of the standards we expect and they are being punished for their failings. We will continue to take action against any firm or individual who present a risk to our objectives of reducing financial crime and maintaining market confidence.”

    Can somebody explain to me what actions the FSA have taken in respect of RBS, HBOS and Northern Rock?

    More pointedly, what actions is the Treasurer who is responsible for the FSA taking against Margaret Cole and her fellow directors for failing maintain market confidence in the banks.

    The FSA must be held accountable.

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