Accelerating digital verification

Conveyancing practitioners are the gatekeepers of the house moving process. 

Not only do we need to know about contract law, property law, Land Registry requirements and have a working knowledge of the UK finance handbook; we also have to be able to speak with clients who are going through what is, potentially, a stressful experience.  

However, one of the most important elements in the day-to-day world of a conveyancer is the prevention of property fraud.

This relies on the accurate verification of the parties in a conveyancing transaction. 

Conflicting requirements

With the onslaught of the coronavirus pandemic, it was not going to be possible to meet with clients to verify their identity.

Even now, as in pre-covid-19 times, it can be frustrating for a buyer and seller who would need to have their identities verified by different parties representing them.

Not only would a conveyancer need to verify identity, but also the estate agent and the mortgage broker.

And as all are regulated by different entities with different levels of compliance, there are different – sometimes conflicting – guidelines as to what is required.  

One solution, which is supported by all the legal and estate agency regulators and representative bodies, is to create an agreed framework to which all providers would be accredited.

This would then allow all parties to rely on one verification of identity and also allow them to meet their own industry’s customer due diligence requirements and obligations. 

HM Land Registry (HMLR), together with the Law Society, the Council for Licensed Conveyancers (CLC) and the Chartered Institute for Legal Executives (CILEx) have been working together, alongside other industry representatives, to find ways of helping the property market during the coronavirus crisis. 

One of these matters is in relation to the verification of identity.

Knowing that a buyer or seller has to verify identity numerous times and in different ways; and knowing that it is not now desirable – or perhaps even possible – to meet clients in person, the crisis has made consideration of the means and methods of identity checking even more relevant. 

Conveyancers need solutions that will help them, especially if they are working from home.  

HMLR has now developed a draft set of requirements which are aimed at encouraging digital identity checks.

In the virtual events it has hosted, it found that there was existing usable technology which would meet the needs of conveyancers, as well as giving consumers and those involved in property businesses far greater security and convenience. 

With this in mind, it concluded that “a strong catalyst for the development of identity checking services aimed at the conveyancing market would be a Land Registry standard”.

HMLR set out its objectives for this standard which are: 

• A clearly defined category of digital identity checking which is achievable, viable with current technology and offers the most security.
• It has to be made clear that it is not a compulsory standard and that other means of identifying parties to a transaction may still be used.
• To demonstrate confidence in the use of such digital identity checks, by stating that if the standard is met, then there will be no question that the conveyancer has done enough to identify their clients; and that there is no longer any risk of the Land Registry seeking any recourse for negligence in identity checking.

The foundation for the digital identity requirements was the guidance set out by the Cabinet Office in its Good Practice Guide 45.

HMLR hopes that by publishing clear standards for digital identification, it is showing support for the creation of affordable and accessible digital identity services that seek to validate an identity on a remote basis, with a higher level of assurance than a manual intervention; and that this process is easy for the client to understand. 

In its recent paper, Encouraging digital identity checking in conveyancing (17 November 2020), HMLR stated that meeting the standard is optional and conveyancers can continue to use all existing methods that meet their duty to identify their clients.

However, the paper states that those conveyancers who can demonstrate they have met the new standard will be protected.

No doubt there will be further discussion around this point. 

This ‘safe harbour standard’ breaks down client verification into four main investigations:

• Obtain Evidence –You must find out if the person you are representing is who they say they are.
• Check the evidence – You must check that the evidence that meets the first requirement is genuine to ensure it has not been forged and is still current.
• Match the evidence to the identity – You must check that the person presenting the information matches the photo in the evidence provided.
• Obtain evidence to ensure the transferor, borrower or lessor is the same person as the owner – This requirement needs to be met by the conveyancer representing a transferor, borrower or lessor. You must connect the client to the property.

These are steps which conveyancers carry out on a daily basis.

Furthermore, the Law Society’s own guidance (developed by the Legal Sector Affinity Group (LSAG)), identifies electronic checks as “a sufficient measure for compliance with money laundering requirements (acknowledging) there may be circumstances where it will not be appropriate”.  

However, it is acknowledged that the industry is largely ‘unregulated’ in terms of data quality, security, liability and service.

The LSAG guidance outlines how to choose a “reputable electronic verification service provider,” but provides little guidance around what constitutes “reputable”.

When choosing an electronic verification service provider, you should look for a provider who:

• Has proof of registration with the Information Commissioner’s Office to store personal data.
• Can link an applicant to both current and previous circumstances using a range of positive information sources.
• Accesses negative information sources, such as databases on identity fraud and deceased persons.
• Accesses a wide range of ‘alert’ data sources.
• Has transparent processes enabling you to know what checks are carried out, the results of the checks, and how much certainty they give on the identity of the subject.
• Allows you to capture and store the information used to verify an identity.

The move follows in the footsteps of the recently revealed digital identity trust framework, a project aiming to create a centrally agreed framework which would enable all involved in the property transaction to rely on one client verification check to comply with their customer due diligence obligations. 

There are many factors within the conveyancing world which have changed during the past year and it would seem that the pandemic has pushed the move towards electronic verification at a far greater pace.

That would otherwise have taken a number of years is now happening in a far shorter time period.

This can only be good news for all those involved in the house moving industry. 
 

Sarah Dwight is a sole practitioner and sits on the Law Society’s Conveyancing and Land Law Committee. She also leads the committee’s residential property working sub-group