ASIC Flags Broker Fraud Risk as BID Compliance Report Nears

ASIC's first review of brokers' best interests duty compliance will publish in Q4, as the regulator also flags a crackdown on coordinated mortgage fraud.

If you've ever wondered what scrutiny sits behind the broker recommending your home loan, the answer is about to become a lot more transparent. Australia's corporate regulator is finalising its first major review of how mortgage brokers comply with their legal obligation to act in clients' best interests — and the findings are due before the end of this year.

ASIC's Best Interests Duty Review: What's Coming

Australian Securities and Investments Commission Commissioner Alan Kirkland confirmed at the Mortgage & Finance Association of Australia's national conference in Melbourne this week that the regulator expects to publish the findings of its thematic review in the final quarter of this calendar year, as reported by MPA Australia.

"We expect to have a report out in the final quarter of this calendar year, so before the end of the year," Kirkland said.

The review has run in two phases across major aggregator groups. The first phase involved gathering data to understand loan flows, commission and clawback rates, and other patterns across the industry. The second phase examined how aggregators oversee compliance processes, with a particular focus on complaints handling and internal dispute resolution.

This is ASIC's first dedicated review since the Best Interests Duty (BID) took effect on 1 January 2021. That obligation requires brokers to prioritise their clients' interests when recommending a home loan — rather than defaulting to familiar products or those that pay the broker the best commission.

Kirkland was clear about what the regulator expects. "ASIC expects to see mortgage brokers doing their work well, having a consistent and robust focus on quality, and where things go wrong, putting them right," he said.

He also set a high bar for the standard of documentation. "If the reasons for a recommendation are boilerplate factors that could apply to anyone, then it will be hard to demonstrate that the recommendation was in that customer's best interests," Kirkland warned. Good BID compliance means recommendations that are tailored, clearly explained, and properly documented for each individual client's specific circumstances and priorities.

The report, when released, will follow a format similar to ASIC's financial advice reviews — laying out the legal obligations under examination, the methodology applied, and a spread of practices ranging from strong compliance through to areas of concern. Kirkland said the intent was to help brokers and licensees benchmark their own practices against industry-wide standards.

Kirkland also addressed the role of artificial intelligence in broking, drawing a firm line for the industry: "You can't outsource your core obligations to an AI tool." Brokers need to understand how any AI system they use generates its outputs, and the underlying legal obligations apply regardless of what technology supports the recommendation.

The Fraud Risk Reshaping the Industry

Alongside the BID review, Kirkland addressed a more immediate and serious risk confronting the sector: syndicated mortgage fraud. He confirmed that ASIC is working closely with AUSTRAC, state police, and the major banks to combat coordinated criminal activity moving through the broker channel.

"This newer and complex form of mortgage fraud involves coordinated conduct across multiple parties, in some instances to facilitate other criminal activity," Kirkland said. ASIC is examining what controls, frameworks, and operational settings are in place across licensees, brokers, and referrers — and reminding licensees of their obligation to report suspected misconduct.

The issue gained national attention after Commonwealth Bank self-reported suspected fraudulent home loans earlier this year, with the suspected scale of the problem growing as more lenders reviewed their books. Kirkland stopped short of commenting on that specific matter, but made the regulator's expectations clear: "We encourage all industry participants to exercise vigilance. This is an evolving and serious issue, and it's in everyone's interest that it's comprehensively addressed so as not to weaken confidence in the home lending sector as a whole."

He also urged brokers to escalate concerns early. "If you're a broker, the first call should be to report it to your licensee. But you may also consider reporting it to ASIC," he said, adding that early intervention limits the reputational damage to the broader industry. Over the past five years, ASIC has used its administrative powers on 17 occasions to remove or restrict brokers and brokerage firms from the industry.

What This Means for Borrowers

For ordinary home loan customers, this regulatory focus has a practical upside. The Best Interests Duty and ASIC's active oversight create a framework that holds brokers legally accountable for the quality of their recommendations. Brokers now arrange 81 per cent of all new residential mortgages in Australia, according to figures cited by Kirkland — meaning the quality of that advice directly affects the overwhelming majority of borrowers entering the market.

If you're refinancing or looking for your first loan through a broker, the BID means your broker is legally required to put your interests first. A recommendation should be tailored to your income, priorities, and circumstances — not a generic product that happens to be familiar, or one that pays the broker better commission without a corresponding benefit to you.

For first home buyers in particular, understanding your broker's obligations can make a material difference to the loan you end up with. Use our borrowing power calculator to get an independent sense of what your budget looks like before any broker conversation — it gives you a useful reference point for evaluating whether the loan being recommended is genuinely sized for your circumstances.

The broader message from Kirkland's address is constructive for consumers: the regulator is active, is holding the industry to a high standard, and will be publishing concrete benchmarks that every broker and licensee in Australia can measure themselves against before year's end.