An investigation called Operation Claw uncovered potential mortgage fraud involving inflated incomes, misrepresented employment and fabricated or unverifiable business activity used to support loan applications, the Australian Transaction Reports and Analysis Center (AUSTRAC) said in a Wednesday statement.

AUSTRAC's Fintel Alliance conducted a joint analysis of data from 10 major Australian banks, identifying potentially hundreds of millions of dollars in suspected fraudulent loans, mostly linked to properties in Sydney in New South Wales.

The activity was not limited to one lender or borrower group, and recurring warning signs across the participating banks included falsified or misleading documents as well as the repeated use of mortgage brokers, accountants, and law firms across multiple loan applications.

AUSTRAC worked with participating banks to identify controls that lenders can use to prevent, detect, and disrupt mortgage fraud. The lenders used the information generated through the investigation to identify potentially fraudulent loans, investigate suspicious activity, strengthen controls, and make further referrals to the authorities. Some banking relationships have been ended, and further action is expected.

"The same warning signs were found across banks that together cover the vast majority of Australia's mortgage market," AUSTRAC CEO Brendan Thomas said. "Every lender should be looking closely at these findings and asking whether the same vulnerabilities exist in their own business," he added.

The Australian Banking Association did not immediately respond to a request for comments from MT Newswires.