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The interim report from the select committee on productivity in Australia said that “enabling banks to access data held by the Australian Tax Office (ATO) when seeking to accurately assess income levels provided in loan applications would improve lending integrity”.
The recommendation comes following a Senate committee hearing, in which representatives from Australia New Zealand Banking Group (ANZ), Commonwealth Bank of Australia (CBA), National Australia Bank (NAB), and Westpac, alongside the Australian Banking Association (ABA), told senators that direct access to verified income information would help lenders fight fraud by effectively verifying documents that had become increasingly vulnerable to manipulation.
To achieve this, the committee urged the federal government to “explore amending the Taxation Administration Act 2001, which currently prohibits the disclosure of tax information to a bank”.
The committee also noted that sharing tax data in order to facilitate loan applications has been successfully implemented in a number of countries, including Norway, Finland, Estonia, Singapore, and the US.
The report added that in conversations with the ATO, the Tax Office “supports the use of data it holds to assist where appropriate and flagged ongoing co-operation with banks in this area”.
The changing face of fraud
The recommendation comes as the banking industry grapples with a rise in fraudulent loan documentation and alleged mortgage fraud.
Several major banks, including CBA and NAB, have recently expanded investigations and counter-fraud operations in recent months, while The Australian Financial Review has reported the scale of mortgage fraud in Australia could be as high as $4 billion.
In the committee hearing, CBA described economic crime as a “material productivity drain on the Australian economy”, highlighting its nearly $1 billion spend in the current financial year on the prevention of fraud scams and economic crime.
The committee also heard how AI was becoming both a powerful tool for fraudsters and one of banks’ strongest defences.
Westpac chief economist Luci Ellis told the hearing that the proposal was not a response to widespread mortgage fraud today, but an attempt to stay ahead of rapidly evolving technology.
“This isn’t about the system as we have it now... the issue is that this is a new technology. It’s developing quickly. People are learning how to use it and so this is about heading off a problem that could become much bigger,” Ellis said.
Similarly, the Australian Banking Association said that exploitation of digital channels is becoming increasingly sophisticated by actors manipulating income statements through AI.
“Income misrepresentation is a persistent issue that is being rapidly amplified by the growing use of artificial intelligence (AI) and synthetic document generation,” the association said.
“At the lower end of the risk spectrum, consumers misrepresent income to increase their borrowing power, in some cases to unaffordable levels. At the most serious end, crime syndicates may be using AI at scale to fraudulently obtain loans to launder and recycle overseas funds into Australian property and business assets.
“This is one of the largest opportunities now open to crime groups and is likely to be increasingly exploited over time.”
[Related: ‘System-wide problem’: Brokers back co-ordinated response to fraud threats]
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