Deposit flicking: Real estate agents urged to cease and desist
Real Estate Institute NSW issues alert to agents, saying 'we are recommending that members not engage with the model'.
THE Real Estate Institute of NSW has warned agents of “serious concerns” about transferring property deposits to third parties in the midst of an official probe into deposit flicking.
The contentious practice has sparked a NSW Fair Trading investigation amongst concerns agents are using emerging e-solutions to avoid new AML/CTF laws by shifting deposits.
Federal financial crime regulator AUSTRAC has warned agents that they remain covered by the “Tranche 2” laws enacted in July, despite the availability of deposit flicking.
On Friday, REINSW alerted members to “serious concerns” with the practice, urging deposit holders to “not agree to release, transfer or direct a deposit to be paid to another party”.
In the alert, the real estate peak body also warned agents not to insert special conditions nominating alternative stakeholders into any contract.
“That is a matter for parties and their legal representatives, not the agent,” the alert said.
“Treat with caution any assurance from a commercial promoter that its model is endorsed by, or reduces your obligations to, a regulator (eg NSW Fair Trading or AUSTRAC),” it added.
The peak body also urged agents to seek independent legal advice on changes to handling of trust money or deposits and seek REINSW assistance if needed.
The recommendations from REINSW are:
- If you are the depositholder, do not agree to release, transfer or direct a deposit to be paid to another party.
- Do not insert, or agree to insert, a special condition nominating an alternative stakeholder on your own initiative.
- Treat with caution any assurance from a commercial promoter that its model is endorsed by, or reduces your obligations to, a regulator and verify any such claim directly with that regulator before relying on it.
- Seek your own independent legal advice before participating in any arrangement that proposes to alter how you handle trust money or deposits.
- Direct any questions about this notice, or about your trust account obligations more generally, to the helpline of REINSW.
REINSW CEO Tim McKibbin said NSW Fair Trading had been asked for guidance on the issue.
“When we have a response we will communicate that to members. In the meantime we are recommending that members not engage with the model,” McKibbin told AC.
AIC NSW president Jennie Tonner welcomed the move by REINSW.
“Deposit flicking has now become a critical issue and must be resolved as a matter of urgency,” Tonner said.
“If estate agents were unsure of what their obligations were with regards to deposit holding and AML/CTF, then this is now been laid out for them very clearly.”
Tonner has previously called on NSW Fair Trading to issue urgent guidance on whether deposit flicking breaches agents’ legal obligations
Fair Trading said last week it did not endorse any particular settlement model but reminded agents not to breach laws on handling of deposit monies.
Concerns about deposit flicking have widened beyond NSW, with the issue now also on the radar of peak bodies in Victoria and Queensland.
AIC Victoria president Shakila Maclean has said conveyancers are worried about third party settlement solutions, especially their impact on reliance agreements.
Queensland Law Society said it was monitoring the issue.
