Mortgage fraud is an inherent risk in the intermediary sector, the Financial Conduct Authority has reminded firms in a letter published today.

In a round-up of its approach to UK mortgage firms, the regulator says that it will “actively monitor” fraud risk and will contact individual firms if it believes it must do so.

As well as the worries originally set out in its March 2019 Mortgage Market Study, which saw it discuss barriers to product innovation, procedures for execution-only borrowers and overpayment concerns, the FCA says that it expects firms to be able to spot the signs of fraud in payslips, accountant certificates, tax returns and bank statements.

The watchdog also says that firms should be aware of cyber risks and should be able to defend themselves against it occurring. Firms should also make the FCA aware of any incidents that result in customer harm.

It adds that governance and oversight is another area of interest, and cites an example of firms increasing the number of advisers with a “corresponding increase in resources to ensure that adequate systems and controls are maintained”, as one of its expectations here.

Oversight of trading names and the Brexit transition period are also highlighted as areas the FCA expects intermediary firms to take note of in the run up to December 2021, reminding recipients of the communique that the FCA will update its strategy after this period ends.

FCA head of department, retail lending Andrew Kay, author of the letter, adds: “The Senior Managers and Certification Regime came into force for firms such as yours in December 2019. You must ensure your firm has implemented the SM&CR effectively.

“Your firm has until 31 March 2021 to ensure all staff in Certified roles are fit and proper to perform those roles. You must identify a Senior Manager as having individual responsibility for ensuring your firm carries out proper assessments of Certified staff, and those who do not meet fit and proper standards cannot be certified.

“Particularly where firms need to do a significant number of Certification assessments, we will challenge those firms whose assessment processes do not result in some individuals being found not to meet these standards.”