Proper Supervision

Rosy Sullivan

Every time an agent misuses trust money, the reputation of our profession is dragged through the dirt. This is bad news for all agents, which is why we were sad to see a prominent Eastern Suburbs real estate agent disqualified until 2021 last week for a shocking secret dealing with a convicted drug trafficker.

The licence of the former Eastern Suburbs real estate agent, was cancelled last week, and NSW Fair Trading has disqualified him from being involved in the direction, management or conduct of a real estate business until 9 September 2021. In September 2011, the Agent pleaded guilty in the Sydney District Court to dealing in the proceeds of crime and was sentenced to one year and nine months imprisonment. The Court suspended his sentence and he was released on a good behaviour bond until 8 June 2013.

The original incident unfolded on March 12, 2008, when Maroubra drug dealer Wayne Cleveland turned up at Cranbrook College with $40,000 in cash. He had come to pay his kids’ school fees. Big mistake.

The school, alarmed at the sight of so much money, declined to accept the full amount owing, taking just $15,000. They told Cleveland that they might have to report the transaction to authorities because it was more than $10,000.

In a state of panic, Cleveland phoned his mate, Glenn Farah, the then chief executive officer of NG Farah. Cleveland proceeded to give Farah a detailed recount what had just happened. Little did they know the Australian Federal Police were listening in on every word, as Cleveland was at the time the chief suspect in a Sydney Airport cocaine syndicate. Laughing down the phone, Farah told his friend that it was ''one of the most stupidest things you have ever done''. But Farah’s next move was equally stupid.

In return for cash, a number of cheques were drawn on a Macquarie Bank account in the name of Glenn Farah Real Estate. Some were used to pay the Cranbrook fees, some were deposited into Cleveland's bank account. On September 20 2009, Cleveland and others were arrested and charged with conspiracy to import cocaine. The next day the federal police raided Farah Real Estate in Marine Parade, Maroubra, and Farah was later charged with laundering a total of $46,500 for Cleveland and his family using the cheques and electronic transfers.

This type of case is precisely why section 32 of the Property, Stock and Business Agents Act 2002 establishes a duty for licensees to properly supervise their business. Section 32(4) allows NSW Fair Trading to issue guidelines as to what constitutes the proper supervision of the business of a licensee. These supervision guidelines have been in circulation since 2005, so you should be well and truly familiar with them. But, in case you need a refresher, here are the key guidelines in relation to the receipt of trust money:

1. A licensee must have written procedures instructing employees of the agency as to their duties in regard to daily or next day banking practices of the agency with respect to the receipt of trust money. The licensee must be able to provide details of the process which the licensee uses to ensure employees comply with the procedures.

2. A licensee must have written procedures requiring the licensee to conduct a review of trust account cash flow on a monthly basis. The review must include a process which shows that the amounts banked to the trust account have been verified using the financial institution’s records as source documents.

3. Where any of the above requirements stipulate the preparation and use of a set of documented procedures, a checklist, or a review system; the licensee must be able to produce this documentation to an authorised officer in accordance with the provision of section 105 of the Act. The licensee must also be able to produce information demonstrating the regular use and maintenance of the required documentation within the agency.

It seems very timely as NSW Fair Trading inspectors are implementing a blitz on Sydney agents (as noted in the Sunday Telegraph on 11 November 2012), that all agents, and in particular Licensees-In-Charge, ensure that they are following the supervision guidelines in all requirements, but particularly in relation to the operation and management of your trust account.