AML risk: Conveyancers’ case against ‘deposit flicking’
Practitioners are lobbying authorities to stop real estate agents from transferring property purchasers’ deposits into a third party, citing a possible breach of money laundering law reform obligations.
THE peak body for NSW conveyancers has backed an industry petition calling for action to clamp down on controversial “deposit flicking” by real estate agents.
The emerging practice, in which an agent transfers a purchaser’s property deposit to a third party to hold on the agent’s behalf until settlement, may constitute a breach of professional obligations, the Australian Institute of Conveyancers NSW argues.
It says some real estate agents appear to believe that by avoiding holding funds in their trust account, they can bypass tough new AML/CTF rules.
An online petition launched by Jared Zak, founder of conveyancing firm Dott and Crossitt, is calling for action to curb the practice.
The petition, aimed at Riverstone Partners product Agency Settlements, had gained more than 130 signatures as of Tuesday night.
AIC NSW president Jennie Tonner said she supported the petition.
“I am hoping it gets enough votes so that we can approach Fair Trading again to urgently meet with us to discuss and solve this issue,” Tonner told AC.
“We are very concerned that one party could hold up to billions of dollars of deposits and if they went bankrupt or receivers were appointed or they were scammed and lost all of the funds, what protection does the consumer under a Contract have to get their deposit back.
“At best, they would be behind larger creditors, which is simply unacceptable.”
In an alert to members this week, the peak body urged conveyancers to take “pre-emptive action” against the practice in order to protect clients.
This included making sure to verify agent intentions on purchaser deposits as early as possible and not “to assume the agent will hold the deposit”.
“Contact the selling agent immediately you receive instructions to confirm they will hold the deposit in their trust account (only) for the duration of the matter, the alert said.
Riverstone Partners, whose Agency Settlements product enables buyers to pay deposits directly into its managed trust account system, did not respond to a request for comment.
On its website, Agency Settlements says the product removes the “most fragile, time-consuming and risky part” of a property sale.
“Agency Settlements replaces sales trust accounts, reduces settlement admin by 90% and ensures one clean, on-time settlement, every time,” it says.
The company is said to have signed up agencies around Sydney for the settlements portal, onboarding several agencies per week since launch last year.
The issue of “deposit flicking” has flared after real estate agents and conveyancers in July came under tough new AML/CTF rules aimed to cracking down on organised crime.
Under the “Tranche 2” laws, overseen by AUSTRAC, practitioners must conduct due diligence on clients, report large cash transactions, keep records, and report suspicious activity.
Companies and individuals in breach of the laws face potential multi-million-dollar fines.
NSW Fair Trading and Dott and Crossitt’s Zak were sought for comment.
