Lenders are currently seeing an increased number of cases with some form of fraudulent income, and this is also the most common reason for a lender to flag a concern with a broker. With the cost of living crisis and affordability calculations tightening, this could increase further.
If an application is submitted and the lender declines the application related to suspected income fraud, a note is also made also against the adviser. Too many flags of this nature against an adviser can see that adviser being removed from the lender’s panel.
Typical issues being seen include:
Family income/business
While many do work for a family business genuinely, we are seeing applications where the client has only just started to work for the family or a recent increase in salary to match what is needed for affordability. Check to see if the business can afford the family member’s salary by looking at accounts and ask to see evidence from HMRC of the earned income. Also, is the annual salary consistent with expectations for the particular role undertaken?
Second job income
Often seen in conjunction with family income, this is where a second job has recently been taken and is needed for affordability. Explore the viability of this, e.g. how many hours and what times they work in both jobs. Again, are the salary levels consistent with the role, and can you obtain independent verification that the salary is being paid legally through the payroll system with tax and NI deductions?
Staged income
This is where fraudulent payslips and a P60 are created, and an amount to match the expected income is deposited into the client’s genuine bank account for 3 months and sometimes up to 6 months. You can protect yourself against this fraud by doing checks on the client’s workplace to check it is a legitimate company, and then phoning the workplace to ensure your client does actually work there.
Checking employed income
If you need to independently check the income, you can ask the client to obtain their tax statement by following the guidance here: https://connectifa.box.com/s/3m8l1iit9816y6ndgkbj5xh5hnhiouc6
When we are notified of a potential issue by a lender about a broker concern, the network will try to work with the broker member with additional training and support plus increased file checks. You will be notified through the confirmation of a change in your ‘Adviser File Check Status’ with the aim that we will be able to report back to the lender our support for your improved file quality moving forward.
If you have any cases that you have concerns about and need assistance with, our risk team will be happy to discuss the case with you.
To find out more about fraud and also gain an extra 2.5 hours of CPD, watch the fraud video on LMS: