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Friday, February 1, 2002
Closing in

The Estate Agency Affairs Board has initiated consultations with the Commercial Crime Unit (CCU) of the SA Police. This follows a spate of high profile revelations of widespread fraud in the profession.

So far there have been no less than 13 740 claims lodged against the Estate Agents Fidelity Fund, and a total of more than R79 million paid out to victims of fraud. In 1999 alone, the latest audited year, R11m was paid out following successful proceedings in 667 cases. Unfortunately, the Board, which administers the fund, has limited powers. It can try and prevent guilty parties from practising by withdrawing their Fidelity Fund Certificates, and can impose a maximum fine of R25 000.
The professions generally are becoming increasingly embarrassed by the escalating criminal behaviour of some of their colleagues. Up to now it has been extremely difficult for individuals to pursue claims for fraud and malpractice, with the professions closing ranks against outsiders. In particular the Law Society (attorneys and advocates), the Medical Association of SA (surgeons, doctors, dentists and anaesthetists) and the SA Nursing Association (nurses and auxiliaries) have acted more as closed trade protection societies, eschewing the interests of individuals paying for the services.
But the pressure is on. The financial services industry is being forced to reform through the introduction of modern legislation that seeks to protect consumers and introduces severe penalties for unethical practices. Laws include the Short Term Insurance Act 1999, the Life Insurance Act 1999, the Policyholder Protection Rules introduced in 2001 in terms of those Acts, and the forthcoming Financial Advisory and Intermediary Services Bill, expected to be enacted during the first term of this year’s parliament. The most recent, the Pension Fund Amendment Act 2001, was passed December 7th, seeks to redistribute some estimated R80 billion of surplus assets to its rightful owners.
Currently more than 35 defaulting attorneys are under criminal investigation. And instead of stonewalling as in the past the legal professional bodies are both cooperating and motivating prosecution. International warrants of arrest for extradition have been issued in several countries.
The recent fast-track appointment of a commission of enquiry into the collapse of the rand is another indication that, hopefully, our country is beginning to get to grips with the unacceptable spread of unbridled criminal and immoral behaviour.
Meanwhile the Estate Agency Affairs Board is, in many ways, showing the way. In working with the CCU it will ensure the successful prosecution of criminal agents. “The unacceptable signal that appears to have been sent to estate agents in the past is that they can escape criminal liability and punishment where thefts of trust moneys have been committed,” comments the Board. It says this is partly because the criminal authorities, “for whatever unknown, absurd and illogical grounds of reasoning,” consider the cases as being in the nature of a civil claim. Since the agent is disqualified from practising and the client is reimbursed for his losses by the fidelity fund, the drive to prosecute melts away.
Motivating the CCU will change all that. The Board has also appointed a Claims Recovery Officer who will head the new initiatives. In addition, it is seeking the active cooperation of the Asset Forfeiture Unit of the SA Police to ensure that offending estate agents are not able to profit from their illegal activities or benefit from their ill-gotten gains. Talks are also under way with the National Investigators Bureau to set up a procedure for a thorough investigation of the assets of guilty estate agents. Extradition procedures will also be put in place. In other words, there’s going to be no hiding place.
The message needs to be: if you do wrong you will be found out and you will face the consequences. Certainty of prosecution can only arise in a society that can competently manage its economic, political and moral affairs. Hopefully, the message is beginning to get across. Let’s hope the medical profession starts to feel the energy from this welcome mood swing too. Oh, and let’s not forget the banks. By Nigel Benetton

Copyright © Insurance Times and Investments® Vol:15.1 1st February, 2002
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