Trust account fraud is possible even without direct access to your trust account. Think not? Think again!

As we have painstakingly come to discover, Property Managers are able to steal trust money even without access to the trust account.

Here’s how we came to discover this un-delightful piece of information about trust account fraud. Unfortunately this highlights how easily it can happen from within your own office.

Trust Account Fraud Within Agency Ranks

The Scenario

This particular Property Manager has been in the employ of an Agency for over 20 years. As you can imagine, she is a trusted member of staff.

The Licensee did everything correctly and by the book. They use a server based trust accounting system with the Licensee being only staff member with access to the trust account. The Trust account is with Westpac and the Agency’s tenants pay their rent using the rent card method.

So far, so good.

The Role of the Property Manager

The Property Manager is responsibilities are to:

  • Receipt rent
  • Reconcile daily
  • Enter invoices
  • Process mid and end of month payments

Where it all Unravelled

The Licensee provided the Property Manager with the Westpac .pay file on a daily basis. With this key piece of information, the Property Manager would enter her own property into the database. She would then sneakily change the tenant reference codes in the system. She would do this by swapping the codes from another property and enter it against her own property. The payment file would upload as per normal and the rent from other properties would be receipted to her property.

Quite the stealth trust account fraud move.

How did this Trust Account Fraud go Unnoticed for so Long?

This Property Manager continued on her fraud rampage for a year. How did she do it? She chose tenants where:

  1. English wasn’t their first language
  2. Tenants who are well in advance on their rent payments.
  3. Owners who are overseas and tend not to check their statements on a regular basis.

How was it picked up?

It was a scheme that was never going to continue for much longer. A well-meaning Tenant came in to the Agency to question their paid-to dates. The Licensee went on to check the bank statement records against the receipt cashbook. They came to see that the funds had been receipted to the Property Manager’s own property. Her time was up.

How could it have been prevented?

  1. Better Supervision

Firstly, the Licensee had put the basics in place but had failed to provide adequate supervision of their employee. Knowing what happens in your Agency on a daily basis will help keep things in check.

  1. User Restriction Controls

Implement user restriction controls in your trust accounting software. Therefore only specific account authorities can perform particular actions.

  1. Monthly Sensitive Changes Report Checks

As Licensee, conduct monthly sensitive changes report checks at End of Month. These checks will show any record changes that have been made throughout the month and will therefore highlight any red flags.

  1. Rotate Responsibilities

Rotating staff responsibilities will work avoid job monotony for your staff as well as providing additional security measures. Distribute the role of receipting to various staff members. Do not allow one staff member sole responsibility for this task.

  1. Separate staff property management

We all know the phrase to keep business and pleasure separate. Same goes in this case. It may seem extreme, but disallowing staff to manager their own properties through the agency can prevent such fraud from occurring.

Finally, the bottom line is to prevent trust account fraud from happening at your agency, keep an eye on your staff activities. Know what they are doing and how they do it, as all it takes is a quick daily check of activities to ensure you don’t fall victim.

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~ Jane Morgan is the Director of End of Month Angels, a consultancy firm specialising in Trust Accounting. Jane knows the legislative requirements of running a successful Real Estate office through her 19 years industry experience. Don’t trust just anyone with your trust accounting. Trust End of Month Angels and get back to what you do best – growing your business.