Back in November, HM Land Registry unveiled a draft set of requirements to encourage digital identity checks in the conveyancing process and provide a ‘Safe Harbour’ for those law firms who use a digital ID provider that meets the Safe Harbour standard.

Those conveyancers who do use an ID provider which meets the standard won’t be pursued by HM Land Registry in any recourse claim against a conveyancer resulting from the registration of a fraudulent transaction, on the grounds that identity checks were inadequate.

It’s an important and timely development and, ultimately, good news for conveyancing. HM Land Registry carries enormous influence and this step will help give clarity to law firms, whilst helping to drive the industry towards a clear framework for using digital ID.

So what changes is HM Land Registry proposing and why?

More about the changes

Fraud is a very real issue for conveyancers. Just last month it was reported a legal services firm which failed to carry out sufficient identity checks on conveyancing transactions was fined £14,000 by the Solicitors Regulation Authority (SRA).

Similarly, another conveyancing firm which reportedly failed to put appropriate safeguarding measures in place, enabled a fraudster with a fake driving licence to transfer money from its client account.

On top of conveyancers already being an attractive target to fraudsters, the pandemic has provided fertile ground for increased rates of identity fraud in 2020.

In the first month of the UK lockdown, Experian noted a 33% increase in fraud rates, and over the past year digital identity provider, Onfido, has seen an upward trajectory of more frequent attacks.

A combination of firms transitioning to remote working, social distancing measures making client due-diligence harder and a turbulent economy providing more opportunity for fraud has led to the perfect storm for identity fraud.

Setting standards

It’s against this backdrop that the market for digital ID has expanded hugely in recent months. Yet whilst there’s been such a rapid shift from manual to digital ID checks, accelerated by the social restrictions of 2020, without a standard in digital ID it’s been impossible for conveyancers to determine whether the tools they are utilising are sufficient to protect their business and clients.

One result of this has been that, as the market has developed, the bar for digital ID acceptance has become very low, which increases fraud risk.

For example, ID verification technologies that purely validate the authenticity of a document via a photo, with no liveness detection, are arguably more dangerous than manual checks as they discourage face-to-face meetings, which although painful, are still a good way to verify your client’s existence and ownership of an identity document.

HM Land Registry is looking to tackle these issues by focussing on setting an industry accepted standard for the use of digital identity by conveyancers.

This standard, based on the guidelines set out in the Government’s Good Practice Guide (GPG) 45, will involve the use of biometric and cryptographic technology and should not only encourage the uptake of digital identity checks by conveyancers, but give conveyancers ‘clarity and certainty’ that they have discharged their duty on identity verification in connection with land registry applications.

If the requirements are met and the Standard is attained, a conveyancer will reach a ‘Safe Harbour’ status, meaning that they fulfilled their obligation to take reasonable steps in relation to the requirements to verify their client’s identity.

Harnessing technology

To be considered as satisfying the standards as currently proposed, the best providers will need to utilise a range of different technologies including biometric facial recognition, Near Field Communication (NFC), liveness checking and for certain types of property transaction, the ability to collect evidence of proof of address.

In combination, these technologies ensure providers can collect identity evidence, confirm that the evidence is genuine, match it to the identity of the person presenting it, and connect the client to the property in the case of transferors, borrowers or lessors.

Only in meeting all of these requirements, will the standards set out by HM Land Registry be satisfied. It’s worth noting that these standards are subject to a consultation which is now closed.

Challenges

Of course, all of this means that, although a welcome development, there will be challenges for providers.

The Safe Harbour threshold has been set very high which presents challenges for e-IDV providers to ensure their product is built to reach these requirements. For example, the NFC technology will require providers to have a native app, as opposed to an online portal, and this technology only works with biometric chip-enabled identity documents, primarily passports.

This means both providers and law firms must be considerate of those clients who may not possess such a document and provide alternative ways for them to verify their identity safely and compliantly.

Lastly, it’s worth noting that, in addition to fraud prevention and protection from falling foul of regulators, there are clear benefits to consumers by accelerating the digitisation of the conveyancing process.

Currently, manual onboarding processes can take up to two weeks. This is contributing to the ever-lengthening property buying and selling process, which now sits at 20 weeks.

With digital identity checks taking a matter of minutes, admin time at the start of the transaction can be cut significantly, allowing the legal work to start sooner.

Particularly pertinent in the current climate, digital identity checks can be carried out from anywhere. This is useful for those clients living abroad, or as the pandemic continues, during any periods of lockdown and for vulnerable clients who continue to shield.

The consultation process ended on 11 December and the industry will be watching closely to see when the new framework will be fully implemented. We have been in regular discussion with HM Land Registry about these recommendations, and we fully support the proposed standard, which will save conveyancers and their clients’ valuable time, whilst reducing fraud risk. We look forward to the standards being finalised and helping law firms to achieve Safe Harbour status.

Olly Thornton-Berry is co-founder and Managing Director of Thirdfort