White lies on loan applications creating compliance nightmares

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One of the speakers at this week’s Canadian Mortgage Conference, Chris Mathers – a 20-year veteran of the RCMP and president of KPMG’s Corporate Intelligence Inc. – cautioned brokers and underwriters that trying to duck around compliance issues can lead to much larger problems down the road.

A serious problem Mathers has seen pop up recently is when the person seeking the loan is an Iranian or Syrian national, as it draws concerns from compliance in regards to potential terrorism.

“Once they see that, then compliance gets involved,” Mathers told MBN. “Meanwhile, the underwriter is trying to get the deal done. So then they ask, ‘How can I get compliance off my back? I know, I just won’t tell them the guy is from a country of interest.’”

Unfortunately, when the loan application does come under a compliance review and it is discovered that the information has been omitted, that a much greater problem is created – all because the broker and/or underwriter wanted to smooth out the process.

“The compliance rules in this country have become so draconian and onerous, that it incents people in the industry to screw around with them,” he says. ”Are they being criminals? No! They are trying to make a living.”

Mathers likens compliance to a trip to the dentist, something that no one enjoys but is a necessity.

“No one says ‘Hey, it’s the compliance guy – we’re so happy to see you!’” he says. “They are a pariah.”

And while many Canadians may view the war against ISIS as involving planes and troops overseas, it is a war that is being waged and funded right here in Canada – which makes following the rules of compliance so necessary during the loan application process.

“The money that is being brought over to this country, we need to be concerned about the provenance of that money,” says Mathers. “They are financing their operations through crime, so if any of that money ends up in Canada and is used to purchase property, then we have an issue.”

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