“I was targeting Australian women,” a liberated Ethiopian man later told British news.
He added, “Mostly the good clients are the older women because they are desperate for love.”
Scam centres growing ‘exponentially’ despite Myanmar crackdown
Banks push for better access to tax data to combat loan fraud
Major banks warn that a flood of fraudulent loan applications across the sector will get worse unless they can securely access tax data to verify a borrower’s income instead of relying on documents that can be easily faked using artificial intelligence.
The warning came after The Australian Financial Review blew the lid on the scandal in February, revealing that Commonwealth Bank and National Australia Bank had both begun investigations into their level of exposure.
Those investigations uncovered networks of accountants, real estate agents, mortgage brokers and bankers making fraudulent applications using fake payslips or other documents – some of which were doctored by AI. Some of the activity has been linked to people seeking to evade China’s capital controls.
Officials from the top retail banks told a Senate committee on Monday that they backed federal government funding in the recent budget to assess whether the Australian Taxation Office should share data with banks, under a regime known as the consumer data right, but called for greater urgency.
The home loan fraud problem has ballooned to at least $4 billion across the five biggest lenders, as the nation’s 10 largest banks audit their books for additional criminal activity. Westpac’s chief economist Luci Ellis said such incidents were likely to grow as more fraudsters recognised the power of a new suite of AI tools.
“This is a burgeoning problem,” she told the committee, chaired by Liberal Senator Andrew Bragg. “The issue is [AI] is a new technology; it’s developing quickly. People are learning how to use it. So, this is about heading off a problem that could become much bigger.”
Australian Banking Association chief executive Simon Birmingham said it was concerning that sensitive documents such as payslips, tax returns and bank statements were often submitted to branches by hand or emailed as PDF attachments.
He said banks should be able to access data held by the ATO to more accurately assess income levels stated on an application, thereby strengthening the integrity of lending.
“Fraudulent loan documentation is a growing problem, and artificial intelligence is making fake payslips and doctored statements frighteningly easy to produce,” Birmingham told the committee.
Slow take up
“This process is an anachronism in the digital age, unnecessarily burdensome for customers, and creates unnecessary risk in our financial system. Buying a home or securing a business loan should not begin with a scavenger hunt through your own financial records.”
Westpac’s general manager for retail banking Damien Macrae said the CDR – the consumer data right, a regulated data sharing regime that went live in the banking sector in July 2020 and was recently switched on for non-bank lenders – had been built at significant cost to banks. Take-up had been slow, but this was the use case the regime was built for, he added.
“Six years on, it remains a productivity oddity: the government-mandated secure data sharing system, yet government data isn’t shared within it,” Macrae said. “We don’t have a decisioning issue at the moment; we have a verification issue. So this would reduce time to verify.”
To allow a bank customer to authorise a lender to review their tax file to assess income, the government would need to amend the Taxation Administration Act, which currently prohibits the disclosure of tax information to a bank.
National Australia Bank executive of home lending platforms Matt Dawson said this would let banks “rely on a single source of trusted data, rather than asking customers to submit multiple documents, such as income payslips for loan applications”.
“You think this would help with the huge problem of mortgage fraud?” asked Bragg.
“Yes,” Dawson replied. “As I said, it would help with documentation verification, and it ultimately would prevent fraud.”
The Australian Taxation Office, appearing later in the day, said it was working with Treasury and the banks on the issue and saw the benefit of providing data in appropriate cases, but was currently constrained by secrecy provisions even if it received consent.
Adequate controls needed
The ATO was “in an exploratory phase to determine how we can do this,” said Paul Beohm, assistant commissioner of law and policy design at the ATO.
“It is probably too early in the process to definitively say, one way or the other, whether it is valuable or not. But internationally we have seen it work, so I would be pretty confident we will see some value.”
Officials from the Australian Prudential Regulation Authority told the committee it was also working with banks and other regulators to understand the extent of the problem and how it could be prevented. It wanted to ensure that banks had adequate controls to ensure they were not the subject of fraud.
“One of the risk vectors or vulnerabilities that have been exposed by trusted professionals like accountants is the issue of banks not being able to go to the source of truth, which is income verification,” Kylie Rixon, Commonwealth Bank executive general manager of financial crime compliance, told the committee.
Banks wrote to Treasurer Jim Chalmers in April, ahead of the budget, arguing the CDR regime, known as “open banking” in the sector, would be more effective if ATO data were made available. Co-ordination between the corporate regulator, AUSTRAC and the ATO could also be improved.
The May budget allocated $62 million over two years to investigate the expansion.
The ACCC – which warned banks to improve loan diligence by better use of the CDR in April, regardless of whether ATO data was made available – said 1.3 million Australians were using the CDR, including for mortgage applications and personal financial management.
Fintech Australia chief executive Rehan D’Almeida said on Monday that broader CDR access would support competition by increasing the speed of decision-making using documents that could not be manipulated.
Birmingham said that it would allow banks to direct resources to lift scrutiny of loans made without ATO authorisation, to ensure they “are triaged and effectively tested”.
Any changes would only be effective if they were embraced by mortgage brokers, Bragg said. More than three-quarters of home lending goes through broker networks, and third-party referrals have been identified as the source of many of the banks’ problems.
The ATO and your bank are about to get cosy
The ultimate odd couple: the tax office and your bank, quietly comparing notes on your finances. But with AI making it easier than ever to fake a payslip, that unlikely partnership might be exactly what stops the next wave of loan fraud.
The ultimate odd couple: the tax office and your bank, quietly comparing notes on your finances. But with AI making it easier than ever to fake a payslip, that unlikely partnership might be exactly what stops the next wave of loan fraud.
History gives us many examples of unholy alliances, like the countries that thought getting together to declare war on the world in the 1939–45 era is a case in point. But when it comes to less geopolitical pairing up, many Australians would have to have reservations about the Australian Tax Office and our banks considering bedding down together.
Unfortunately, this really worrying proposition could be for a good cause, as the incidents of fraudulent loan applications grow higher by the day thanks to the work of AI agents such as Anthropic’s Claude and his rivals like Microsoft’s Copilot and Salesforce’s Einstein!
The AFR’s James Eyres reports that the incidence of dodgy borrowers rearranging reality to get a loan “will get worse unless they can securely access tax data to verify a borrower’s income instead of relying on documents that can be easily faked using artificial intelligence.”
That newspaper told us in February that both the CBA and NAB had been investigating the rise of false documentation aided and abetted by the professionalism that these AI agents can bring to the loan application table.
Eyres says there is a network of accountants, real estate agents, mortgage brokers and even bankers who are teaming up using AI, and apart from conspiring to secure loans, there is also an intention, in some cases, “to evade China’s capital controls” over their population!
Bankers told a Senate committee on Monday that the Budget’s allocation of funds to assess the good sense of the ATO sharing tax data with banks was a good idea.
The bankers made the following arguments to make the alliance between them and the ATO:
- AI is helping loan applicants cheat the loan application system.
- Many key documents, such as payslips, tax returns and bank statements are presented by hand or as PDFs via email, which are easily doctored.
- Banks should be able to check ATO data to verify that the documents are legit.
Former Liberal Senator Simon Birmingham, who is now the CEO of the Australian Banking Association, said the following to the committee: “Fraudulent loan documentation is a growing problem, and artificial intelligence is making fake payslips and doctored statements frighteningly easy to produce.”
The banks think an easy fix to the problem exists using the Consumer Data Right (CDR) service, which as its website explains, helps manage your personal or business finances and is secure and easy. “If you choose to use Consumer Data Right, the automated, secure data transfer is done between the providers. The system is strictly regulated by the Australian Government.”
The banks call this “open banking” but it’s not as open as they would like.
But the problem and the solution are an easy fix and were explained by Westpac’s general manager for retail banking Damien Macrae.
“Six years on, it (CDR) remains a productivity oddity: the government-mandated secure data sharing system, yet government data isn’t shared within it,” Macrae said. “We don’t have a decisioning issue at the moment; we have a verification issue. So, this would reduce time to verify.”
The ATO told the committee that it was looking at the matter with Treasury but no decision either way has been made. Given the AFR reported recently that loan fraud with our top five banks had blown out to $4 billion, this potentially undermines the financial reliability of our banks, which all bank shareholders should really care about.
And given our banks’ pivotal role in funding our economy’s businesses and consumer activities, accessing ATO data to verify someone’s creditworthiness sounds both worrying but necessary.
I’d like to tell banks to “buzz off” when it comes to our tax data, but in the age of AI and the crooks it will enable, we need a watchful ‘big brother’ or minder, who as the old Dennis Waterman song once promised: “I could be so good for you!”
