Building Legal Solutions
Safe Harbour - Is the Ship Coming in For Conveyancers?
- AuthorHarvey Gibbs
In a previous blog I talked about property fraud. Following on from that I would like to highlight the steps that all residential and commercial property conveyancers need to take to check the identity of their clients. This is something that conveyancers must do not only as an anti-fraud measure but also to comply with their obligations under the Money Laundering Regulations as, sadly, conveyancing comes with a very high risk of identity fraud and money laundering.
Conveyancers have an obligation to take reasonable steps to verify the identity of their clients. It is probably fair to say that prior to the Covid pandemic the identity check procedure that most conveyancers adopted was based on the client having to travel to the conveyancer’s office with their identity documents, which would then be copied and saved to the conveyancers database. As conveyancers are unable to start work on a transaction until they have checked their client’s identity this meant that the client would need to move fast to avoid any initial delays. However, it is not of course always possible for a client to call in at their conveyancer’s office at short notice as, for example, they may be working out of town, and so this had always been a cause of some frustration not least to the client.
The onset of the pandemic, lockdowns and rules about social distancing suddenly meant that conveyancers needed to seriously re-think their identity check procedures. Some conveyancers had already been using digital verification checks (through a digital identity check provider), but this was something that all conveyancers now had to consider so that identity checks could be completed remotely without any need for the client to come to the office. However, many conveyancers were concerned that such checks might not be sufficient to satisfy their due diligence obligations and were reluctant to take them on board. The Land Registry has therefore introduced a digital ID standard for conveyancers to follow, known as the “Safe Harbour Standard”. As a result of this, in any transaction where the conveyancer adopts the process, which is set out in the standard, they will be granted “Safe Harbour” status in that transaction.
What is the “Safe Harbour”, and why is it important to conveyancers? It means that the Land Registry will not pursue the conveyancer for any loss that the Land Registry incurs if it transpires following completion of the transaction that the conveyancer’s client is not the person who they claimed to be IE there was an identity fraud. Adoption of the Safe Harbour Standard is not compulsory but where there is no Safe Harbour status then the Land Registry may seek to recover any compensation (that the Registry has had to pay out to the victim of the fraud) from the conveyancer.
What does the conveyancer have to do to gain Safe Harbour status? There are three requirements for all transactions plus a fourth for those cases where the conveyancer is acting for the seller in the sale of a property or the borrower in a re-mortgage. These requirements are:
- The Conveyancer must obtain evidence from their client, such as a passport or driving licence, which can be checked by cryptographic security features. These must include an electronically held photograph of the client so that a biometric facial check can be done.
- The evidence that has been obtained must then be checked to ensure that it is genuine. This can be done through a digital identity check provider to verify the documentary and cryptographic security features of the evidence.
- The evidence must be matched to the client. This is done through a digital identity check provider by way of a “liveness check” which entails taking a photograph or video of the client so that the image of the client which is contained in the evidence can be biometrically validated. This can be done on a mobile telephone.
- Evidence must be obtained to ensure that the client is one and the same as the owner of the property being sold or re-mortgaged. The conveyancer must connect the client to the property and this is done by obtaining from the client two documents from a specified list which contain the client’s name and address.
Provided that the conveyancer has complied with these points they will not be pursued by the Land Registry for any loss in relation to identity fraud that the Registry has sustained in the transaction. It is however crucial that the conveyancer has carried out the identity check through a digital identity check provider which is able to meet the standards.
Clients should be aware that there is also a benefit to them in that they can deal with their conveyancer’s identity requirements without leaving their home, and that it should speed up the start of their conveyancing process.
No doubt conveyancers will come up against some clients who are cynical about using digital identity verification. Those clients may well push their conveyancer to deal with the indemnity check by way of the traditional face to face meeting in the office. However, the fact that the Land Registry is willing to accept digital verification (if their requirements are satisfied) will hopefully give those clients the confidence that they need to accept the use of it. Furthermore, I suspect that most conveyancers (and their professional indemnity insurers) will, as a condition of accepting the instruction to act for the client, insist that the digital verification method is used in order that the conveyancer will get the protection of the Safe Harbour. Having said that, there will be some cases where the digital verification method cannot be used, namely where the client does not have the necessary evidence such as a current passport or driving licence. In those cases, the conveyancer will have to adopt their conventional due diligence procedure to satisfy themselves as to the identity of their client.
For an initial consultation regarding digital identity verification, please contact the Feldon Dunsmore team on 01926 954694