Fraud prevention guidelines

Guide on how to prevent fraudulent behaviour.

Supervising an agency – Fraud Prevention

Identity fraud and scams are increasingly prevalent and the property industry is not immune to these events.

Two highly publicised incidents in September 2010 and March/April 2011 resulted in properties being sold in Western Australia without the knowledge and consent of the lawful property owners.

These sales occurred when criminals impersonating the true owners provided the real estate agents with fake contact details that were then used for future dealings about the property.

These events highlight how easily fraud can be committed and emphasise that agents always need to be alert to ensure fraudulent real estate transactions don't occur.

Most importantly, agents need to have sufficient controls in place in their agency policies and procedures to prevent their agency or clients being defrauded.

Legal requirements

The Secretary has outlined requirements for identity verification in the Supervision Guidelines.

These guidelines are legally enforceable and must be followed by all licence holders.

The guidelines require agencies to have a process to confirm the identity of a person entering into an agency agreement.

To verify a person's identity, a licensee must sight an original or certified copy of:

  • a primary proof of identity document
  • two secondary proof of identity documents
  • a document providing proof of legal ownership of the property.

Clause 4 of the Supervision Guidelines includes more information and examples of acceptable documentation.

To assist in identity verification, NSW Fair Trading has developed a proof of identity checklist that can be used for the sale or purchase of residential property.

Fraud warning signs

Agents should take extra precautions if any of the following warning signs appear:

  • a change in address, bank details or other contact details after instructions to sell a property are received
  • the transaction involves people located or documents issued overseas
  • a request for funds to be sent to a different bank account to the one normally used by the client – including but not limited to offshore accounts
  • advice is received that the sale is urgent, for example, because of an overseas investment or employment opportunity
  • updated email addresses are generic such as Hotmail or Gmail
  • comments are made by the seller that if the sale is successful or quick, future lucrative work or other incentives will be provided to the agent.

What to do if fraud is suspected

The nominated licensee in charge should have documented processes and procedures for verifying the identity of parties proposing to enter an agency agreement.

All employees should be made aware of and comply with these procedures to prevent and report fraud.

If an agent suspects real estate fraud they should:

  • cease to act further on the client’s instructions until identity is confirmed, and
  • contact the NSW Police Force or NSW Fair Trading if appropriate.