Deposit flicking: No end in sight to lengthy inquiry

The NSW Department of Fair Trading has defended its probe into deposit-flicking, saying a “long approach” is needed to get regulation fit for purpose.

Deposit-flicking, where a real estate agent transfers a buyer’s property deposit to a third party until settlement, has been under agency scrutiny since it launched the probe in July.

It was sparked after conveyancers flagged the practice as a financial risk to buyers and a potential breach of professional obligations.

Concerns have also been raised that it could be an attempt to bypass AML/CTF law reform responsibilities.

Addressing the AICNSW state conference on Saturday, Angus Abadee, NSW Fair Trading strata and property services commissioner, said the agency continued to assess the practice.

Abadee said Fair Trading was reluctant to “sign off that certain business practises or certain businesses are compliant or not compliant”.

“I don’t think that’s a healthy position for the regulator to be getting into,” Abadee said.

“When there’s a request for why hasn’t fair trading provided a definitive statement, it’s because we don’t want to rush to the finish line and miss the nuance which would undermine the integrity of the position that we’re taking.”

The agency’s “long approach” was driven by needs to consider views of vendors, purchasers, conveyancers, solicitors, agents “and then obviously the third-party platform”.

Other factors at play were how third-party deposit management impacted the fiduciary duties of agents to clients and the need for input from the NSW Law Society.

“I also want to be very clear that third-party deposit management could help solve other problems in the sector such as property scams by creating a system which has additional layers of verification and security controls,” Abadee said.

In his address, the commissioner also flagged an increase in enforcement activity, especially related to trust account fraud.

He said the agency, under his watch, had already prosecuted an individual conveyancer for defrauding a trust account.

“It won’t be the last time we have to do this,” he said.

“Unfortunately, particularly where we’ve got financial stress being put on people, they make bad decisions and think that the money that they’re holding on trust is their money or business expense money when, no, it’s being held for someone else.

“Please, take that for granted, that trust accounts will always be something that we’re looking at,” Abadee added.

While the regulator would take action when required, Abadee said official data showed that the sector was a “really healthy profession”.

“It’s a very advanced and sophisticated profession,” he said.