Criminals paid to buy houses in new 'builder bailout fraud'
THE Criminal Assets Bureau (CAB) is investigating a number of cases of a new fraud where builders have paid off criminals to create false identities and buy houses which they had not been able to sell due to poor market conditions.
In the 'builder bailout fraud', scam-artists create fake personas to take out mortgages, then buy unsold properties at a vastly inflated price.
The mortgage is then never repaid and the bank is left with an over-valued property.
Yesterday the head of the CAB revealed that the scam, which has become common in the US, is now being investigated in Ireland.
Chief Superintendent John O'Mahony told the Oireachtas Joint Committee on Finance that there had been an increase in the number of cases with the decline in the economy.
The scam starts with a deal between a fraudster, often connected to a crime gang, and a builder who cannot sell his properties.
The criminal creates a false identity by making fake bank statements, tax certificates, payslips and passports using computers and the internet. With the false identity in hand, they then work on a loan application, often with a corrupt mortgage broker.
When the loan is passed by the bank, the money is then transferred to the fraudster, under his false identity, through a solicitor.
The house in question is then bought from the builder for an inflated price.
False identity
Mr O'Mahony said the person with the false identity never makes payments on the property and gets a pay-off from the builder.
At the end of the scam, the builder has been paid, the fraudster has received a cut of the deal and the bank is left with a property which is worth much less than the mortgage which was taken out on it.
"This has been driven by the decrease in the economy," said Mr O'Mahony.
The CAB did not say how many cases of the fraud were being investigated.
In separate cases, criminals are also using funds to raise mortgages which are then paid for by cash from illegal activities, which has become known as 'laundering by substitution'.
"On many occasions, once the transaction had been in place for some time and had come to appear legitimate, the original mortgages were discharged by a number of large cash lodgments, following which a new mortgage can be raised," he said. In many cases, the criminal pays their mortgage on time because they do not want to raise suspicion, the committee heard.
The use of false documentation is also becoming more prevalent, with fakes used in every case of property purchase the CAB has pursued through the Proceeds of Crime Act in the High court over the past three years.
- Shane Hickey
