AI may make it easier for people to make fraudulent home loan applications, New Zealand's financial regulator says.Australian regulator Austrac said this month it had found potentially hundreds of millions of dollars of suspected fraudulent loans.Operation Claw identified suspected mortgage fraud involving inflated incomes, misrepresented employment and fabricated or unverifiable business activity used to support loan applications.The activity was not confined to one lender or borrower group. Recurring warning signs across participating banks included falsified or misleading documents and the repeated use of mortgage brokers, accountants and law firms across multiple loan applications.It has been suggested that AI made it easier for people to fabricate their employment records or bank statements.In New Zealand, the Financial Markets Authority's executive director of response and enforcement Louise Unger said advances in AI had the potential to make it easier for people to create convincing fake documents here, too, including pay slips and other financial records.Financial Markets Authority executive director of response and enforcement Louise Unger.Supplied / FMA"We expect entities to take a risk-based approach to mortgage fraud. They should have appropriate policies, processes, and controls in place to verify information and identify unusual documents, applications, valuations, or transactions that may indicate fraud or exploitation."Financial institutions should continue to review and strengthen their fraud detection and verification processes to help protect both consumers and the integrity of the financial system."The country's biggest bank, ANZ, said any situation that involved fake or malicious documentation being used in an application was a concern."ANZ NZ continues to invest in application fraud prevention to protect our customers and the bank. We would note that, while very rare, mortgage fraud is a complex area."For many people, a home loan is the biggest financial commitment they will ever make, which is why mortgage-related scams and fraud can have serious consequences."People who are under financial pressure can be particularly vulnerable to scammers offering quick fixes, guaranteed loan approvals, or assistance with refinancing. Customers should be cautious of anyone requesting upfront fees, asking them to share personal or banking information, or encouraging them to provide information on a loan application that is inaccurate or misleading."Squirrel chief executive David Cunningham.Supplied / SquirrelSquirrel chief executive David Cunningham said using open banking to access statements directly, rather than relying on applicants' supplied copies, would eliminate the risk of forgery."Banks are aware of the risk, but I'd say they have bigger concerns than fake documents, including other AI fraud and cyber threats. They can cross-reference a lot of data to validate it, including credit reports, and rely on solicitors and agents to meet their AML obligations, and so on. Incidentally, many AI tools won't allow requests to forge documents."Criminal groups that involve professionals in a syndicate are a concern for banks in mortgage fraud."Sign up for Money with Susan Edmunds, a weekly newsletter covering all the things that affect how we make, spend and invest money.