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Jun24

Verification of Identity – Technology, Cyber- risk and the requirements to verify clients/agents identity in NSW

Amanda Quin - Wednesday, September 18, 2019

Blog authored by Andrew Cannon   (email aac@peacockes.com )

Between the competing tensions of the all enveloping emergence and dependence of technology in modern Australian society, the innovation of legal firms to increasingly deliver digital services to clients’ against the fading abyss of traditional ‘paper’ conveyancing practices, the time for property and conveyancing transactions to be completed ‘paperless’ and electronically has come of age. Conversely, with the rise of the brave new world of breakthroughs consequence of technology’s introduction into the legal, property and conveyancing spheres, lawyers and conveyancers are also in equal measure becoming increasingly exposed to an unprecedented number and forms of cyber-risks, fraud and ethical dilemmas when transacting with clients and other parties digitally.

To date, such examples of the forms of cyber-risk and fraud omnipresent online are cited from, amongst others, Astell v Australian Capital Territory [2016] ACTSC 238, Infotrack’s ‘The Increasing Threat of Identity Crime – A guide to the VOI landscape’ and the Legal Practitioners’ Liability Committee ‘Security Warning for PEXA users’ in response to the well covered ‘Masterchef case’.

Subsequently, relevant government, law and policy makers have responded in kind to these examples of very real and present cyber threats of fraud and identity theft. As evinced in s12E of the Real Property Act 1900 (NSW) (“RPA”) practitioners must satisfy their professional obligations in conveyancing and property transactions for verifying a person’s identity or (“VOI”) of clients’ and/or their agents’ acting by either:

  1. Applying the “VOI standard”; or
  2. Verify the identity of a person “in some other way that constitutes reasonable steps”.

This requirement also applies to the identity verification of mortgagees.

Authorities and best practice guidelines derived from sources such as the Electronic Conveyancing National Law (NSW) section 23 and the Model Operating Requirements prescribed by the Australian Registrars National E-Conveyancing Council (ARNECC) Verification of identity confirm VOI is now a mandatory requirement for lawyers and conveyancing representatives in NSW, applicable to both traditional ‘paper’ and ‘new-age’ electronic settlements. VOI is also a mandatory requirement for all conveyancing transaction in Qld, SA, WA and VIC. However, NT, TAS and the ACT are yet to ‘get onboard’ and recognise formal requirements for VOI in conveyancing and property transactions.

Both electronic settlement platforms PEXA and Sympli also recognise the necessity for representatives to complete verification of identity for each of their client’s and/or acting agents’ in order to complete settlement, through the mandate of their respective participation rules and agreements with network users (ostensibly law firms).

Section 12E of the RPA, which also deals with the requirements of gaining client authorisation and certification, provides:

“…The Registrar-General may from time to time determine, in writing, rules for or with respect to the preparation and lodgment of documents to give effect to conveyancing transactions (the
"conveyancing rules" ), including rules for or with respect to the following:

(a) the verification of identity and authority, including:

(i) the standards to which identity and authority are to be verified, and

(ii) the classes of persons in respect of whom identity and authority are to be verified, and

(iii) the classes of documents in relation to which verification of identity and authority requirements apply, and

(iv) the classes of persons who can undertake verification of identity and authority, and

(v) any supporting evidence and retention requirements…”

Subject to s12 E of the RPA, the Office of the Registrar General’s Conveyancing Rules (“Conveyancing Rules”) sets out that a representative must take ‘reasonable steps’ to verify the identity of both:

  • Each client; and
  • Each agent that acts for the client (such as an adult child giving /taking instructions for their parents or a buyers’ agent etc).

The necessity for practitioners (lawyers and conveyancers) to verify the identity of clients and their agents’ applies to a broad range of conveyancing transactions and dealings with property to ‘cover the field’ including:

  • To create, transfer, dispose of, mortgage, charge, lease or deal with in any other way an estate or interest in land;
  • To register, note or record anything on the title to a property; or
  • To get the registration, note or record of something on title changed, withdrawn or removed.

As per rule 4.1.1, the Conveyancing rules took effect on 26 November 2016 and places the onus on lawyers and conveyancer representatives to take “reasonable steps”, which are imposed as a professional ethical obligation owed to each client and their agents’, for identity verification. Furthermore, rule 4.1.5 of the Conveyancing rules provides a higher standard of ‘reasonableness’ for representatives to make further inquiries’ to verify the identity of each client and their agents’ in dubious or suspicious situations where:

“the Representative knows or ought reasonably to know that:

(i) any identity Document produced by the Person Being Identified and/or any Identity Declarant is not genuine; or

(ii) any photograph on an identity Document produced by the Person Being Identified and/or any Identity Declarant is not a reasonable likeness of the Person Being Identified or the Identity Declarant; or

(iii) the Person Being Identified and/or any Identity Declarant does not appear to be the person to whom the identity Document(s) relate; or

(b) it would otherwise be reasonable to do so.”

In the event that representative cannot be satisfied of a person’s identity to a transaction, arguably legal practitioners are availed the benefit under the s12E of the RPA and chorus of VOI best practice guidelines from property and conveyancing institutions to cease acting any further in the conduct of the conveyancing/property transaction in lieu of the exercise of due diligence and professional responsibility owed.

The Australian Registrar’s National Electronic Conveyancing Council (ARNECC) provides some guidance to lawyers and conveyancers on what ‘reasonable steps’ means under RPA legislation and the Conveyancing Rules when taking a client’s or their agent’s VOI. However, whilst “reasonable steps” is not a defined term under either the RPA or the Conveyancing Rules in NSW, the concept of “reasonable steps” does allow practitioners to demonstrate professional judgment and exercise their discretion and independence to assess what is reasonable in the circumstances of each case and the client when applying the VOI standard.

What is the VOI standard ?

The VOI standard, which is one method for representatives to verify a person’s identity, can be read as a two-tiered process requiring that:

  • A “face-to-face” interview with the client/client’s agent to be identified; and
  • Examination of original identity documents, from the list of approved and acceptable documents, be tendered and produced by a person to be identified.

Face-to-FaceTime interview ? – Issues with video technology for “face-to-face” for VOI interviews

Pursuant to ARNECC Model Practice Rules Guidance Note 2, “face-to-face” interviews conducted via video technologies such as Zoom, skype, FaceTime and others can be “manipulated and forged” and carry inherent risks for legal representatives to be cautious and aware of. As advised by ARNECC, when applying the VOI standard, such modern video technologies “…do not constitute a face-to-face in person interview, nor does it allow identification of original documents, as required by the Verification of Identity standard…” .

Where a representative “uses some other way that constitutes the taking of reasonable steps” to verify a client’s or their acting agent’s identity, there is scope within this ‘less rigid’ method and it may be more suitable and appropriate in some circumstances, particularly where currently the Verification of Identity standard is not. Examples where the use of skype or other similar technologies may be appropriate include for remote/regional clients with no or limited access to VOI agent services or the ability to attend their legal representative’s office. However, given the currency of the VOI laws (in NSW and Australia wide), there is yet to be a ‘test-case’ in NSW or another Australian jurisdiction on this point, determining the legitimacy and suitability for video technology to be used to conduct “face-to-face interviews”. ARNECC arguably eludes to the latter point by stating that:

“use of the (Verification of Identity) Standard is not compulsory and may not be practical in some circumstances.”

However, this was qualified with its submission that:

“where the standard is not used and there is a dispute the subscriber will be required to establish that the method used to verify the identity of a Person constituted “taking reasonable steps” in the particular circumstances.”

How can I complete my VOI ? – Paper and Digital services

Despite the strict requirements on all parties including buyers, sellers and legal representatives to ensure compliance with VOI, identity verification in NSW can be satisfied in several ways such as:

  • In the office with your conveyancer/lawyer (usually at the time of, or just after the completion of exchange); OR
  • VOI agent services such as Australia Post Land Title verification, ZipID, ID Secure and MaxID. These services aim to provide quick and accessible services, paper-based or digital forms. Additionally, most practitioners now have accounts with these VOI agent providers which allows them the equal convenience to access secure and confidential portals which produces and stores a client’s verification of identity, usually sent to the representative as a report.
  • However, depending on the priority required/ordered, both your conveyancer/lawyer representative or VOI agent will likely charge a fee for the service of verifying your identity and authority (express or non-express) according to the standards prescribed by the RPA and the Conveyancing Rules.

To the latter point, only equal to the embrace of technology in the  conveyancing and property spheres has been the rising tide of tech enabled identity agents and providers, free from the constraint of legal ethical obligations, to make identity verification a viable ‘market’ and the ‘clients’ of law firms and conveyancing practices their ‘consumers’. In concert with settlements ever-increasingly being settled more efficiently electronically, VOI services today are arguably most popularly offered and delivered digitally, via tech enabled and online identity verification agents offering the convenience of well branded and trendy VOI apps. Most digital VOI agents’ services via apps are tailored for both apple and android powered tablets and smartphones, which comprise amongst other features, GPS mapping and sophisticated ‘real-time’ video and photographic technologies allowing identity verification to occur “some other way that constitutes reasonable steps” and in the broadest sense of the meaning, “face-to face”. As such, these digital VOI agent providers offer their services ‘anytime’, from either the convenience of work or from the comforts of home.

Who is required to complete VOI ? Natural/legal persons and Australian/foreign and overseas status

VOI in NSW is required to be taken for all applicable conveyancing and property transactions regardless of whether the entity is:

  • A natural or legal person; or

On the basis of citizenship status is:

  • Australian citizen or resident;
  • Foreign citizen or resident;
  • Overseas at the time of the relevant conveyancing/property transaction.

The Registrar General’s Guidelines for Verification of Identity on the NSW Land Registry Services (“LRS”) website sets out the minimum documents requires for persons who are Australian citizens or residents, including a identifier declaration, as well as the requirements for foreign persons and/or residents. The documents which most readily satisfy the identity verification standards in NSW include, but are not limited to:

  • A current valid Australian drivers’ licence;
  • Australian passport; and
  • Birth certificate.

During the conduct of the examination of the original documents to be verified, the (lawyer/conveyancing) representative or VOI agent must be satisfied, so far as reasonably possible, that the original documents tendered, photographs taken (if any) and/or searches conducted for verification are true and confirm the identity of the person to the transaction. A representative lawyer or conveyancer should also verify the identity of such entities like appointed individual acting for a company or as power of attorney. For a Company, VOI can be satisfied by:

  • Conducting and producing an ASIC search confirming such records of the existence and identity of the registered company name; and
  • The identity of the individual duly appointed Officers (Directors and Secretaries) whom are authorised to sign or witness documents on behalf of the Corporate body in such capacity, including the affixation of the Company seal.

Reasonable steps for taking VOI in NSW for a power of attorney can also be satisfied by:

  • Confirming the currency and validity of a certified original copy of the power of attorney appointing the person as power of attorney for another party to the property/conveyancing transaction; and
  • Verifying the identity of the person appointed to act as power of attorney.

In relation to overseas clients and/or their agents’, one method legal/conveyancing representatives may use to satisfy the requirements for VOI in NSW involves:

  • Instructing clients and or their agents’ acting to have their ID documents certified at their nearest Australian embassy or Australian Consulate office which will sign, date and endorse copies of the original identity documents; and
  • The certifying Australian embassy or Australian Consulate officer completing with the client and/or their agent acting the approved Australian Embassy/High Commission/ Consulate identity/ witnessing certification (certification) and client authorisation. Other methods may include, with the legal representative taking further ‘reasonable steps’, having overseas client verify their identity at an international law firm.

How long does my VOI last for once completed?

However, once a person’s VOI is confirmed, it need not be updated for a period of 2 years and should be held securely (either paper or electronically) by the representative (lawyer or conveyancer) for a period of 7 years.