‘Contentious settlement solution’ under the microscope
Victorian conveyancing body says transparency around customer transactions must be paramount.
CONCERNS have widened about the controversial practice of deposit flicking by real estate agents, with the issue now on the radar of peak bodies in Victoria and Queensland.
The practice, where a real estate agent transfers a property deposit to a third party until settlement, has sparked concerns in NSW of financial risk and AML/CTF non-compliance.
On Wednesday, Australian Institute of Conveyancers Victoria said it was also worried about the contentious settlement solution, especially its impact on reliance agreements.
Asked about deposit flicking in the state, AIC Victoria president Shakila Maclean said consumer protection must remain top priority.
“Innovation in the property sector is welcome but it should never come at the expense of transparency, informed consent or the safeguards that have long existed to protect buyers and sellers,” Maclean, owner of All Hours Conveyancing, told AC.
“Where a third party is involved in holding, transferring or releasing deposit funds, practitioners need to understand exactly how the arrangement operates.”
“They should know where their clients’ money is going, who is holding it, under what circumstances it can be released and whether the arrangement gives rise to any AML/CTF risks or other legal obligations,” she added.
In Queensland, the Law Society said the issue was not yet significant but that it was being closely watched.
“We will continue to monitor developments as everyone involved in property transactions adapts to new AML/CTF obligations,” a spokesperson said.
“Our message to practitioners is to ensure they understand and comply with their AML/CTF obligations and maintain appropriate safeguards.”
Under recently enacted federal AML/CTF laws, known as “Tranche 2”, practitioners must conduct due diligence on clients, report large cash transactions, keep records and report suspicious activity. Those in breach risk multi-million-dollar fines.
Financial crime regulator AUSTRAC has cautioned real estate agents that they remain covered by the new anti-organised crime laws, despite the availability of deposit flicking.
John Nguyen, an AML/CTF expert at Sydney-based AML Partners, said it was not possible for designated operators under Tranche 2 to avoid screening clients via outsourcing.
“That’s a misconception and an issue,” Nguyen told AC. “You can’t outsource your AML compliance.”
“You as the principal of the business will always be the one that will face the fine, face the questions from AUSTRAC,” he said.
The Real Estate Institute of NSW has said it is worried some real estate agents believe they can outsource AML/CTF obligations via deposit-flicking.
It has said that deposit flicking requires closer scrutiny, with the model raising “serious contractual and legislative concerns”.
Earlier this month, NSW Fair Trading launched a probe into the practice after at least 170 conveyancers lobbied authorities for a clampdown.
AIC NSW president Jennie Tonner has called on NSW Fair Trading to issue urgent guidance on whether deposit flicking breaches agents’ legal obligations.
On Wednesday, Fair Trading said it did not endorse any particular settlement model and reminded practitioners “they practice under strict legal obligations which require their handling of deposit monies complies with legislation”.
