BREAKING: FCA opens AML probe into MFS, lender at centre of £1.3bn mortgage scandal - AML Intelligence

By PAUL O’DONOGHUE, Senior Correspondent

THE FCA (Financial Conduct Authority) has opened an enforcement investigation into collapsed mortgage lender MFS (Market Financial Solutions).

London-based mortgage lender MFS collapsed last month. The company filed for administration amid allegations of fraud. It owes multiple financial firms an estimated £1.3 billion ($1.7 billion).

In a statement, the FCA said: “FCA has opened an enforcement investigation into Market Financial Solutions Limited (MFS).

The UK financial watchdog said that MFS is an ‘Annex 1 business’. This means that it is only supervised by the FCA for its compliance with AML (anti-money laundering) rules.

“Annex 1 registered firms are not authorised or subject to wider FCA regulation,” the FCA said.

The core of the scandal centres on claims of “double pledging”. This relates to fraud allegations claiming that the same property assets were used as security for multiple loans.

Chief Insolvency and Companies Court Judge Nicholas Briggs approved the MFS administration following an application from lenders Amber Bridging and Zircon Bridging.They cited “serious irregularities” in the company’s finances.

Judge Briggs said that the allegations of fraud are “very serious”, adding that claims of “double pledging” required urgent investigation.

Paresh Raja, the founder and chief executive of MFS, is barred from dissipating assets worth up to the suspected value of the funds allegedly missing from the company.

Lawyers for Mr Raja told the Daily Telegraph: “Mistakes have been made but there has been no intention to defraud whatsoever. Mr Raja has not been the beneficiary of any shortfall (if any) there may be.”