CALGARY - RCMP have launched a formal investigation into an alleged mortgage fraud at the Bank of Montreal after a cursory inspection of documents showed a strong possibility of criminal wrongdoing.

Investigators had previously said that they were evaluating the documents the bank had provided to see if there was enough information to proceed.

Sgt. Patrick Webb said Thursday that investigators have only had a chance to look at some of the tens of thousands of pages of documents provided by the bank.

"Not all of that documentation has been examined totally, but it's concluded now that there's a very strong possibility of some criminal activity, and that is why at this point in time we've moved into a criminal investigation."

The Bank of Montreal (TSX:BMO) has filed a lawsuit accusing hundreds of Albertans of a sophisticated scheme that generated $70 million worth of phoney mortgages.

Among the defendants are mortgage brokers, realtors and lawyers, including Calgary backbench Conservative MP Devinder Shory.

The bank has said it is not alleging fraud against Shory. It alleges that the MP was negligent in the way he acted as a lawyer for both the bank and a straw buyer in four transactions that lost the bank about $300,000.

Webb said it's too early to say if anyone named in the civil suit will face charges.

"In this situation, all of the individuals who are named in the lawsuit would be people that we'd want to speak to. It's totally speculative at this time to say that we're naming anyone as a suspect."

Shory has said that he has done nothing wrong and will defend himself vigorously against the accusations. Prime Minister Stephen Harper has declined comment on the case, saying it is a private matter that happened before Shory became a member of Parliament.

The Bank of Montreal alleges in the suit that some of the defendants bought houses that cost less than average price in upscale neighbourhoods, then forged papers to make the houses seem to be worth as much as others in the area.

The bank says the fraudsters paid people known as "straw buyers" a few thousand dollars to put their name on a mortgage application and then forged more documents to make it look like the straw buyers had the ability to pay.

Once the mortgage was approved, the fraudsters pocketed the difference between what they paid for the house and the mortgage they were able to get, the bank alleges, and the money was then sent overseas.

The allegedly fraudulent mortgages were worth around $70 million and the bank says it expects to lose around $30 million. The allegations have yet to be proven in court.

Webb said the investigation is expected to be lengthy due to the massive amount of documentation involved.

"Certain nothing we've looked at now is absolute total evidence and we're about to lay charges. That is quite a ways down the line."

He said the force's Calgary Commercial Crime Section will work on the probe with the Calgary police's Economic Crimes Section.