Involvement of accountants in $1bn home loan fraud 'concerning', says Senator O'Neill

The fraudulent loans were procured using doctored applications and false documents such as fake income statements created through the use of AI, according to reports by the Financial Review.

The Financial Review reported yesterday that CBA has now referred two mortgage brokers and a number of accountants to police as its investigation into the loan fraud unfolds.

In the Committee hearing on Friday, the corporate regulator was questioned about how it has responded to media reports about suspected home loan fraud in relation to not just CBA, but also Westpac and ANZ.

During the hearing, Senator Deborah O'Neill referred to a quote from an article in the Financial Review stating that criminals were potentially targeting the CBA by buying shell companies and using fraudulent income documents to secure loans. The article suggested that there were no actual businesses and that criminals were using "dodgy accountants" to show income.

O'Neill questioned ASIC about how accountants were able to engage in this type of misconduct, what systems had allowed these activities to occur and whether further policy changes were needed.

"What are you saying to the accounting bodies? How were accountants who were enabled to do this, able to do this?" she said. 

O'Neill also outlined her concern around how these behaviours were being observed and reported to relevant bodies by accountants, auditors and the big four firms.

ASIC commissioner Kate O’Rourke said she would give the issue further consideration ahead of another hearing for the committee in two weeks, which will involve the professional accounting bodies.

O'Rourke noted that the doctoring of financial statements went beyond just accountants and that the extension of Tranche 2 money laundering requirements to the accounting profession from 1 July would help ensure these activities were better detected.

"I think that extension of the money laundering requirements to a wider scope of people who have the obligation to report what they see - so conveyances, real estate agents, accountants and lawyers - is a very significant extension," said O'Rourke.

"And I think, in part, because of their facilitation of commerce, property and other really important commercial transactions where the risks that [the committee has] drawn out about money laundering; using dirty money and then repaying a mortgage, that's exactly the basis on which those extensions (as I understand) occurred to try and improve the visibility of that kind of misconduct."

ASIC commissioner Joe Longo said that fraudulent loan applications had not previously been a prominent issue in the Australian market, but could be an emerging issue for the banks.

Longo said that until recently, he believed the number of fraudulent reports to be fairly immaterial, but that recent reports suggested it could be a "real, emerging issue with the banks".