How does the P2P sector protect its customers from fraud?
We ask the industry about the protective measures they put in place…
Paul Sonabend, Executive chairman, Relendex
The prevention of fraud is at the heart of Relendex’s business model. Relendex employs a variety of methodologies: some, as you would expect from a P2P, are cutting edge, and others remarkably old-fashioned.
Modern technology allows the detection of money laundering, suspicious transactions and much more. The FCA is particularly diligent in these matters: as well as ensuring the protection of investor funds, they require client money and custody asset (CASS) audits, daily reconciliations, weekly compliance meetings and much more. These are all part of the DNA of a regulated fintech. Technology also provides much of the automated background checks on borrowers.
The old-fashioned checks are specific to Relendex’s commercial property lending sector. Relendex is not an algorithmic lender. In many ways, Relendex is a traditional, “know your client”, “boots in the field” lender. Relendex meets borrowers, inspects all sites and undertakes extensive due diligence using independent valuers and lawyers. Relationships are established over years, with the majority of loans now being made to established clients.
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Nothing is more important to Relendex than the strength of our reputation. This means protecting our lenders’ finances by ensuring that all measures are taken not only to provide an excellent investment product but also to guard against all forms of fraud.
Brian Bartaby, Chief executive, Proplend
The potential for fraud to occur is an ongoing and real-time issue for all financial technology platforms and can arise in many forms throughout the customer engagement journey. Proplend fosters an environment of strong management commitment with effective controls which combines people, strategy, governance and risk assessment to build our robust fraud prevention strategy and then utilises the latest technology and analytics to detect, deter and prevent fraud anywhere across the platform.
Lee Birkett, Chief executive, JustUs
As a digital, compliance-first platform, we utilise the outstanding identity technologies available to verify that JustUs applicants are fit and proper before being accepted as a member.
Borrowers and investors, before any loans are approved, are screened heavily against many KYC digital databases, and adopting this live technology has prevented many bad actors attempting to enter our ecosystem.
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Bruce Davis, Joint managing director, Abundance Investment
This question is a difficult one to answer – we have a number of anti-fraud checks and protections as would be expected of any regulated investment firm – but obviously the specifics of what those are and how we combat attempted fraud are confidential as we would not want to put any information in the public domain to any potential fraudsters.
My operations and compliance team run a very effective anti-fraud operation and we monitor carefully for any emergent threats (including cyber) or new strategies being used by fraudsters. Regulated firms have very clear responsibilities to help combat financial crime such as fraud or money laundering and we regularly test our systems and controls with third party security experts to ensure we are equipped with the latest anti-fraud measures.
Read more: £171.7m lost to investment scams using APP fraud last year
Narinder Khattoare, Chief executive, Kuflink
We minimise risk from due diligence undertaken on borrowers.
The majority of new business is provided from authorised brokers or introducers who will complete their own Know Your Customer (KYC) checks. Our sales support team will ensure the introducer is Information Commissioner’s Office (ICO) registered. Once the application is received with the sales team, prior to the application being submitted to the underwriting team, valid photo ID and proof of address dated within the last three months is required as well as the last three months’ personal bank statements and business bank statements if applicable.
Once the above has been provided, the sales team will submit the application to the underwriting team for review. Underwriting will complete a credit check, confirm the borrower is on the electoral roll, as well as an anti-money laundering (AML) check and CIFAS check to ensure the borrower is creditworthy.
Furthermore, Google searches will be undertaken to investigate any negative publicity on the borrower, property or company. We also request the source of funds and evidence of funds, which is then confirmed at this stage. Additionally, solicitors will ensure all borrowers have been verified with their own KYC, AML and source of funds checks, prior to a loan completing.
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Cormac Leech, Chief executive, AxiaFunder
On the claimant side, we rely quite heavily on the solicitors running the claims to verify the information relating to the case details. We also get extensive case documentation that we cross check for consistency. Solicitors are regulated by the Solicitors Regulatory Authority which is a useful validation point. We also do reference checks where possible.
On the investor side, we use automated onboarding systems to verify identities supplemented with ID and proof of address checks. We also have calls with investors which helps with the KYC process.