A group of housing developers, solicitors and surveyors are alleged to have defrauded the now-nationalised high street bank Bradford & Bingley out of £40m in a buy-to-let mortgage scam.
Yesterday, nine people were arrested in dawn raids by more than 50 fraud squad officers from the City of London Police. And more arrests are expected to follow as the investigation, which focuses on mortgages taken out on more than 500 properties in the south of England between 2005 and 2007, continues.
It is one of 615 investigations run by City of London officers – the UK's lead force on economic crime – into alleged mortgage fraud. The inquiries are said to involve 10,000 victims and losses run into hundreds of millions of pounds.
Yesterday's arrests were of eight men and one woman aged between 29 and 73. They were held at six homes in Sussex and north London and searches were carried out at three business premises. All were arrested on suspicion of conspiracy to defraud and money laundering. They are said to include surveyors, solicitors, developers and a bank official.
The City of London Police also revealed that the inquiry centres on Eastbourne Financial Services Limited (EFS), a mortgage broker based in East Sussex, which applied for mortgages from Bradford & Bingley.
EFS was a business regulated by the Financial Services Authority but is now in liquidation and is no longer authorised by the FSA. Bradford and Bingley was nationalised by the Government last year after coming close to collapse following overexposure to the sub-prime mortgage market.
The arrests come less than a week after The Independent revealed that the City of London Police and the Serious Fraud Office were investigating a series of major frauds in the City.
Mortgage fraud typically involves corrupt surveyors and developers colluding to inflate the price of newly-built properties and then taking out a mortgage against its manufactured value at the expense of buyers and lenders. In a rising housing market such fraud is rarely detected, but with house repossessions increasing due to the recession, it is more easily spotted. Police sources say many more of these frauds are expected to be uncovered as the country's economic situation worsens.
Some experts have suggested that banks are making the job of investigating mortgage fraud more difficult by not alerting the authorities, instead burying losses in toxic debt to beat adverse publicity and avoid the risk of undermining confidence in the industry.
A spokeswoman for Bradford & Bingley said that the firm has co-operated with the investigation. She added: "We are working with the police and are very pleased with the arrests and with the progress the investigation is making."
Detective Superintendent Bob Wishart from the City of London Police said: "The scale of today's operation shows City of London Police's commitment to investigate frauds and bring those behind them to justice.
"We know fraud has the potential to impact on local communities. We are determined not only to work with colleagues across the UK to investigate such frauds but to liaise with other agencies to mitigate impact on innocent people affected by the criminal greed of others."
Meanwhile, in a separate investigation, three men were yesterday arrested in connection with an alleged mortgage fraud, money laundering and tax evasion scam worth £3m. The men were arrested in Coleraine, Co Londonderry, and Ballymoney, Co Antrim, in Northern Ireland, by detectives from the organised crime branch. The investigation involves 25 properties, income tax and capital gains tax evasion.
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