Mandatory electronic settlement is scheduled to come into force in Western Australia on 1 May 2018 – for all eligible documents. There is still a possibility that the WA parliament will stop the mandating – as is the recommendation from The Institute of Conveyancers Western Australia (AICWA).
At the same time that this is taking place, the WA government has begun the investigation of privatising its land registry known as Landgate.
The regulator of the electronic settlement system is a body known as ARNECC which is a body comprised of the individual state and territory land registrars.
However, some land registries and state governments have invested in the only e-settlements system that is currently operational in Australia, PEXA. AICWA is concerned about the potential for monopoly behaviours from PEXA as a result of mandating legislation.
The investors in PEXA have had to wear the significant financial operational losses since its establishment. Banks and land registries have at least had the opportunity to benefit from efficiency gains through digitisation however the other private investors have simply put money into PEXA and have to wait until a golden payday – in whatever form that comes.
It is in these times of change and changing interests that AICWA has called on the regulator to be replaced. Full statement from AICWA below:
AICWA again met with representatives from the Land’s Minister’s office recently to discuss aspects of concern regarding the regulation to require all eligible documents to be settled electronically. The following 6 key points have been offered to the Minister’s office for consideration:
1. ARNECC’s role as a ‘regulatory body’
ARNECC should be congratulated for having achieved the joint creation of a platform and framework that is now PEXA.
However, the AICWA strongly believes that moving forward, ARNECC and the state-based Registrar’s involvement should not extend to regulating a national, billion dollar financial settlement platform.
Instead, we believe that the time has come for a more appropriate body such as APRA to take over regulation of the electronic settlement eco-system.
Initially, we would welcome a truly independent review of the regulatory framework under which the ELNOs operate, and expect that such a review would support our belief that ARNECC is no longer suited to this role. We believe that a mandate before the results of this independent review have been finalised, and made publically available would be incredibly premature.
2. Pricing Policy
AICWA has made a number of submissions to Landgate, ARNECC and other bodies requesting evidence of the Registrar’s power to regulate ELNO pricing.
The only obligation an ELNO has in relation to pricing is Rule 5.3(e) of the Model Operating Rules:
“The ELNO must determine its fees according to a publicly available, equitable and transparent pricing policy which is kept current by the ELNO and includes the manner in and frequency of which prices will be reviewed by the ELNO”
There is no Rule in the Model Operating Rules which requires Landgate/Registrar/ARENCC to approve the PEXA’s Pricing Policy or amendments thereto.
The Registrar’s Powers (Rule 20 of Model Operating Rules) do not extend to Pricing.
We welcome the assistance from the Minister for Lands in highlighting to us where in the legislation states that the Registrar does in fact have this power.
Our concerns in this regard lie in the fact that currently, with only one ELNO in operation, and what we understand to be no true power for the Registrar to regulate PEXA’s pricing, there is little stopping PEXA in the months or years to come significantly increasing their prices to the detriment of consumers.
3. Account verification
With a rise in the occurrence of email & computer-based fraud in Australia, we have significant concerns around the lack of account verification in PEXA.
In a paper settlement, we would physically walk a bank cheque to a branch, and deposit it at a teller. The teller cross-checks the name of the account with the name on the cheque. If our client’s emails had been intercepted, and a fraudulent account given to us, we would usually be alerted at the point of deposit that the account name does not match the cheque.
Furthermore, if a fraud is identified in the day or two following a paper settlement, there is a window of time for the cheque to be stopped and the fraud prevented.
With electronic settlements’ almost-instant funds transfer, these two fraud-minimisation strategies are lost.
Only this week, two Queensland law firms had their emails hacked and as a result, millions of dollars have been redirected by fraudsters.
AICWA has long-requested that the banks & PEXA invest into the development of an account verification system that checks cross-checks not just the BSB & Account Number, but also the Account Name for recipients of funds.
4. Scope of eligible documents
Currently, and it is expected also as at 1 May 2018, only 60% of transactions are considered eligible to be completed electronically.
Many of the 40% of ineligible transactions fall out of scope due to limitations of the Office of State Revenue ROL system and Landgate’s 130+ document types.
It would be prudent of the Government to be allocated additional funding to OSR and to Landgate to see much needed improvements made to ROL and to assist Landgate in fast-tracking their form rationalisation project, thus greatly increasing eligibility.
Ideally, 85% or more transactions should be eligible prior to regulation to mandate.
5. ELNO Insurance
Further to the point above on account verification, we have concerns over the amount of insurance that an ELNO is required to have.
Currently, this amount is only $20 million. This cap could quickly be reached, particular if two or three eastern-states properties were fraudulently transferred, and then where does that leave the ELNO, and thus, our State & clients?
6. ELNO and Landgate’s BCP & Redundancy plans
The AICWA have on a number of times requested detailed information from PEXA and Landgate as to their redundancy and BCP strategies. To date, all that we have been in given in response is assurances that these plans exist and will work, if they are ever needed.
As I’m sure you can appreciate, assurances are wonderful, but to really give us, our members, and our customers confidence in the electronic system, we require a much more detailed account of that these plans entail.
AICWA would like to drive home the point that the we fully and actively supports the development of e-Conveyancing in WA.
We have always, and will continue to, work closely with our members and other industry bodies to ensure the smoothest of transitions as we move towards the new digital age of property settlements.
[AICWA statement dated 20/12/17]
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