The FSA has banned three individuals for mortgage fraud and fined two of them a total of £414,683 for knowingly submitting false and misleading information to secure mortgages for themselves and their customers.
The FSA has fined Mark Bates from Sheffield-based Pace Financial Management £264,683 for knowingly being involved in mortgage fraud whilst he was a partner at the firm. He has also been banned from working in regulated financial services.
The fine includes a disgorgement of the £74,683 profit he made by diverting commission to himself and a colleague which should have been paid to Pace.
Bates, in conjunction with an adviser at Pace, obtained a mortgage for himself using false payslips and P60s, submitted a mortgage application for a client using false income and employment information, and gave mortgage advice despite not being qualified.
The FSA’s investigation also revealed that Bates had recruited an adviser that he knew had been dismissed twice before for gross misconduct.
The regulator says this effectively allowed the firm to be used for financial crime.
On February 18, 2010 Bates was found guilty of three offences relating to conspiracy to defraud, money laundering and conspiracy to obtain a money transfer by deception and sentenced to four years imprisonment.
Alan Hill, also at Pace, has been fined £150,000 and banned from working in financial services for breaching FSA rules which state that a firm must conduct its business with integrity.
During the FSA’s investigation Hill admitted to faking documents then using these to apply for mortgages for at least six customers.
Hill was paid by a third party for forging documents that he knew would be used for mortgage fraud.
In March 2009 Hill pleaded guilty to nine offences of conspiracy to obtain a money transfer by deception, obtaining a money transfer by deception and making false instruments.
On February 18, 2010 Hill was convicted of five further offences to which he previously pleaded not guilty, all of which were related to financial crime. Hill was sentenced to five and a half years imprisonment.
In addition Waqarul Hassan Shah, a partner at Manchester-based firm K S Financial Services, has been banned from working in regulated financial services for knowingly submitting false income figures on a buy-to-let mortgage for himself, inflating his income six-fold from £11,700 to £65,000.
Shah was also found to have acted recklessly by submitting false and misleading details in a customer’s mortgage application.
The FSA also found that Shah failed to put in place adequate systems and controls to prevent false and misleading mortgage applications being submitted to lenders and to ensure customer files were checked.
The FSA would have fined Shah £40,000 had it not been for evidence that the penalty would have caused him serious financial hardship.
FSA managing director of enforcement and financial crime Margaret Cole says:“Bates, Hill and Shah all showed they were not fit to work in regulated financial services and presented a serious risk to customers and lenders alike with their reckless and unscrupulous actions.
“Mortgage fraud is a crime and we take any failings that put customers or lenders at risk very seriously. The prohibitions will help make the mortgage market a safer place and the fines will send a message to other intermediaries that they must adhere to our rules and act with integrity at all times, or face the consequences.”
A total of 96 mortgage brokers have been banned by the FSA to date.