Sometimes you overlook a problem because it has become a regular part of everyday business activity. Well, almost every day I see companies or individuals offering full-package loan files for sale via multiple different channels from people all across the world. Some of these packages have been stolen from the rightful owner and the others may be aged enough where they were sold following company policy. This problem is biggest in the MCA industry where there is always a chance a file a broker submitted to a direct funding company gets leaked from that office to be processed elsewhere. This is commonly known as backdooring a file. A person is essentially stealing the file to do with it what they want, sell it to someone else, or get it funded themselves.
It happens so often now it is almost accepted as the cost of doing business. Business loan brokers still try their best to prevent this from happening but when it happens to them there is little they can do without hard evidence. Even then it could be a costly fight to get justice.
So why aren't more people caught and prosecuted for stealing files?
A few reasons why more people aren’t prosecuted to the fullest extent of the law are:
The funder's process can’t determine the guilty party
Funders don’t care enough
They are a willing participant
Security technology is not sufficient
Lack of enforcement capabilities
**Don’t want the public to know they caught someone at their company. THIS IS MAYBE THE TOP REASON PEOPLE AREN'T PROSECUTED. Many funders take the point of view that if I make this a public situation then I'm going to lose the trust of brokers and thus lose business. Not true, keep reading for my explanation.
Why does it continue to happen
Some of the reasons why backdooring continues to happen are the same as why it's not prosecuted more often but it might be as simple as it's money and people are greedy. I don’t think it's usually that people aren’t paid enough for their position given the value they bring although nothing is perfect. Some people may say it can be related to the cost of living being higher. So to pay for that cost people resort to illegal activity.
Also, it's worth mentioning again that getting caught and the punishment for it don't scare enough people.
What can we do about it?
Many things can be done, here are some that are top of mind:
One, we need to let funders know that it's better for everyone if you prosecute the guilty parties and make it known. I was a first-hand witness to a case where two employees were caught backdooring files at Greenbox Capital back in 2016-2017. Those two guys were led out by the cops which sent shockwaves through the company and a strong message through the industry as the word spread. No one in that office would dare do anything like that again knowing the consequences.
As an ISO Manager at that time, I didn’t see any negative effects on deal flow. In fact, I talked to my brokers who said ‘at least they are doing something about it because there are employees at every company that can take a turn down this path.’ Basically, it's better to catch them, let it be known, and then because of the heightened attention in that company few people would attempt the same thing.
Another thing to do is implement more advanced cybersecurity measures in the workflow. The funders who have been doing this have few problems. There are many options for software that tracks a person's work on their computer all the way down to the keystroke. Emails need to be monitored. Cell phones should be put away at their desk. For remote workers using a company laptop, there is software that will limit access to certain information and send alerts on other actions.
Then also cameras in the workplace. Is an individual frequently leaving their desk beyond the norm? Have talks with them and see what's going on, it may be totally innocent but you have to find out.
Then implement secret shoppers or other hidden data in files if you suspect you have a problem. The idea alone will scare off people from attempting to backdoor files.
Always willing funders for files with shady origination
Unfortunately, there will always be people and companies that either look the other way or fully endorse doing whatever they want with files that they get their hands on. I believe that will continue to be the case for the foreseeable future until or unless law enforcement steps in or lawsuits are filed against the guilty parties and they have to pay a substantial price.
However, the government doesn't get involved much on the enforcement side. They are making new laws and regulations for commercial finance but these new laws do not mention stealing files that I am aware of. The only way I know of people getting prosecuted is when the owner of the funding company takes it upon themselves to call the authorities.
What next?
If funders are unwilling to prosecute people, then this activity will continue. Brokers will just look out for themselves as much as possible and when things go wrong they chalk it up to the cost of doing business.
That shouldn't be the case. We need more leaders who want to change this ‘acceptance of backdooring files.’ The merchants deserve better. Brokers deserve better. Who is going to step up? It's a new year, and time to take action against stolen files.
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