MLR Report ?

C_D

I am sure that you are better placed than I am to comment upon contract law, but I would have thought that the borrowers' remedies might be (i) a claim for damages (based upon the loss to them arising from the misrepresentation), and / or (ii) rescission (meaning in effect the mortgage is unwound and cancelled and the loan has to be repaid by the borrower so as to put everyone back to where they started).  I would not have thought however that the misrepresentation rendered the mortgage contract unenforceable, by which I mean I would not have thought the misrepresentation puts the borrower in a position where he has no need to repay the loan. 

I am thinking in terms of the Misrepresentation Act 1967 but you may have in mind a different piece of applicable law.

As to a report under MLR, the first question is, "Has a criminal offence been committed?".  If the misrepresentation is a fraudulent misrepresentation then that is a criminal offence.  It will be a fraudulent misrepresentation if it was made deliberately dishonestly with a view to obtaining a permanent or temporary gain or causing a loss or risk of loss to the victim.

I think it is fairly clear that the misrepresentation is a part of obtaining mortgage business - and that involves obtaining a gain (interest which the lender charges to the borrower).  It is also clear that the lender has indeed obtained a benefit from the mortgages (in terms of the repayments made by borrowers).

So the remaining question is , "Was the misrepresentation made deliberately and dishonestly?"

If you know, or suspect, or have reasonable grounds to suspect, that it was then you should be considering making a suspicious activity report (SAR) to your firm's MLRO or to SOCA.

Even so you would not make a report if the information on which your suspicion is based came to you in 'privileged circumstances' or is covered by common-law legal professional privilege.

Of course if you do submit a SAR to SOCA that by no means guarantees that any action will be taken by the authorities concerning the matter.

Does that help?

David

How on earth do you decide whether an act was deliberate or not ?

Was the leaflet copied from somebody elses in inocence, in many large organisations a "can do attitude " or "JFDI " attitude exists.

I am not a laywer but:

I would have thought recission would be difficult as, difficult to restore parties to their precontract position.

so you are left with Damages.

You might also want to look at Negligent misrep as I believe the burden of proof is reversed.

If it is fraud then perhaps damages for fraud are available and the Misrep act 1967 does not apply ?

as said above time for a decent contract lawyer.

Kalden

Clearly C_D has at least a suspicion (he might put it more strongly than that) that the misrepresentation is deliberate and dishonest.  That is enough to trigger an obligation to report under MLR 2007 / s330 PoCA 2002.

Equally clearly C_D does not have proof of dishonesty - it is conceivable that the misrepresentations arose through some awful accidental error (such as a template being adapted from one used by another lender and not sufficiently checked before being published).  But if proof were required it would be necessary to ask reporters (such as accountants) to carry out their own criminal investigations before reporting.  That is not what the law requires.

David

was perhaps not very clear, the information in this case does look pretty deliberate to me.

but: one could equally argue (perhaps in slightly less obvious circumstances e.g. a criminal offence which the offender may or may not have been aware was a criminal offence) that no report was needed as it was not deliberate.

There would seem to be a very wide playing field between what one person would report and another would not. Just with the word deliberate. We are after all deliberately mislead on a daily basis by marketing campaigns (food labelling comes to mind but this is not criminal)

In a lot of cases without further enquiry, which I believe we are not required to do, it can be very difficult to decide deliberate or not as this may vary from one client to another for the same offence.

Is the choice to report entirely ours so long as we document our reasons ? can we ever be right or wrong ?

Kalden

The law in s330 PoCA 2002 was carefully drafted to include both a subjective test (i.e. what a particular individual feels) and an objective test (a recognisable standard).

So if you (personally and subjectively) suspect 'money laundering' (in effect someone dealing with money or another asset which they know or suspect to have been derived from crime) then you are obliged to report under s330.  But, as you say, in any given circumstances person X might have a suspicion whereas person Y might (quite genuinely) not have a suspicion.

That is the subjective test.

But the law also requires that a report be made when there are 'reasonable grounds' to know or suspect 'money laundering'.  So, in law, you have to make a report where there are reasonable grounds to suspect money laundering even if no thought of it has ever entered your head.

That is the objective test.

If you found yourself being prosecuted for failing to report, then the prosecution would have to prove either (i) you did know or suspect that someone was engaged in money laundering but failed to report it, or (ii) there were reasonable grounds for you to know or suspect it (based on information which had come to you in the course of a business in the regulated sector) and you failed to report it.

So the prosecution would look at, for example, file notes that you had made (in which you might have made a note of your suspicion) and would look at information which you received (and might argue that an ordinary and decent person would have had a suspicion based on that information).

Of course it may be that you are an innocent or unsuspecting type who believes all your clients to be fine upstanding people who would never do anything dishonest.  Well, tough!  You could find yourself behind bars.

It is partly because of the danger of being prosecuted for innocently doing nothing that people like myself keep going on about this legislation (and C_D is so critical of it).

David

www.MLROsupport.co.uk

Recission is ok for those who are still in their own homes...But since this company is aggressive in pursuing repossessions...

What happens if the house has already been repossessed but the mortgage included this fraudulent statement? Is there a further can of worms here?

I can't say I'm too surprised by a mortgage lender making fraudulent claims in it's literature. And now I know its American owned I'm even less surprised.

I read a US website sometimes - zerohedge - and they are utterly scathing about bank misbehaviour and financial looting which they see as being systematic and endemic and utterly embedded in the banking culture. Having looked at the many cases that are public knowledge, I have to say I think they are right about that although sometimes they get a bit nihilistic and end-of-the-world-as-we-know-it. (e.g. buy gold, buy food, buy guns, have a survival plan...).

But if you stack it up and look at all the cases of bank misbehaviour, there are so many different cases (including at least one UK listed entity) and it is so pervasive I can't believe there isn't more action from regulators and authorities to deal with it. Conflicts of interest. Misrepresentations of risk or of legal issues. Selling non-existent assets. Selling impaired assets as good. Misbehaviour that triggered the global financial crisis. To give you a few examples:

Nobody got prosecuted for misselling the mortgage backed securities that triggered the financial crisis. They were making so much money on this scheme that they sold on mortgages that didn't yet exist and then bundled them later. They sold mortgages that were already in default, and certified these as good debt. They knowingkly worked with a hedge fund planning to short the debt, and planning which debt should be sold as good debt to unwitting customers so that they could then short it. And this is all public knowledge, and exposed in Congress.

Look at the MASSIVE front-running buying or selling shares by banks and hedge funds ahead of public announcements by listed companies. I know its circumstantial evidence but it looks like insider trading to me. And what do we have - 8 prosecuted in the city and a handful in New York. And the front running continues. Is there a more reasonable explanation for how banks can have quarter after quarter without a single negative trading day and be so lucky in buying and selling shares just a couple of days before the good/bad news story?

Look at the rigging in the silver markets. The CTFC is supposed to set position limits but had been declining to exercise its authority. Pushed it has now set position limits of 25% for physical deliver and 125% for cash settlement. But existing positions that are larger than this are exempted! SO somewhere there is at least one bank whose derivative position is more than 125% of the market. Could that be the same bank that recently announced its copper position is less than 90% of the copper market? Worse yet a trader turned whistleblower and told the regulator the signals being used to coordinate the market, and predicted the next activity and how it would be signalled. There was no obvious action until the whistleblower went public. Now we have these weak position limits.

It does seem to be very much worse in the US than the UK. For example. over in the US many courts are sitting back and letting banks fraudulently close mortgages they don't actually hold. And the banks now have one of their own as the White House chief of staff. But in the UK we're not immune, as shown in the example you have, or the copper position, or the UK bank outed as taking part in the silver rigging, or Northern Rock's channeling its mortgages into an offshore entity, or... or... or... or... or ... or ...

SO if you have a financial organisation that you can PROVE has been misbehaving, I say go for it and godspeed. But don't be surprised if you encounter a wall of disinterest, or passive support for the mortgage company from the court system, or unexpected hurdles placed in your way.

Sorry for the rant, but this misbehaviour is one of my pet hates. And in case anyone thinks I have said anything here that could be an issue -everything I have cited is in the public record, reported in newspapers, and some cases has been the subject matter of congressional hearings, SEC investigations and reports (but not prosecutions), etc. Banks have even paid fines relating to some of these cases (but without admitting guillt). How can payment of a $700 million fine not be an admission of guilt?