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Forensic Accountants Could Check Financial Applications – 12 April 2013

Member: Nifa

As credit rating agency Experian reveals that mortgage fraud jumped by nearly 10 per cent last year, mortgage companies may have to ask forensic accountants to verify applications.  According to Experian, 38 in every 10,000 mortgage applications was fraudulent in 2012 compared with 35 in 2011 and the rise is being blamed on the economic climate and tough lending rules.

Tactics used by applicants to obtain mortgages that they cannot really afford include painting a rosier picture of their personal circumstances, such as how much they earn and hiding a poor credit history.  This could mean that in a prosecution, forensic accountants would be brought in to find the difference between the real picture and the one painted in order to obtain the funds.

Meanwhile, the difficult economic climate is also being blamed for businesses getting into trouble, which will also require the expertise of the forensic accountant to find out what has gone wrong or in cases of fraud perpetrated by desperate business owners.  A recent study among small business owners by AXA Business Insurance reveals that insurance fraud is a real issue, with one in three admitting they have inflated, or would inflate a claim while one in ten would bend the truth when applying for a policy.

If this is suspected, the insurance company would bring in forensic accountants to investigate the circumstances in the business leading up to the claim to find out whether or not there were grounds for raising funds dishonestly.  A prosecutor would need hard evidence of the real picture surrounding an individual or business before committing to a costly court case and it is the forensic accountant who would be able to provide that evidence and potentially even be used to testify during a case.

Author: Roger Isaacs, 12 April 2013

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