HM Land Registry last week announced its digital ID standard, a new set of requirements to encourage digital identity checks in the conveyancing process. The move will benefit consumers and conveyancers alike, driving the industry towards a clear set of standards in digital ID.
On one hand these changes fall within the broader digitisation of the conveyancing process, encouraging homebuyers to take advantage of technology that allows them to prove their identity quickly and securely with their mobile phone. Fitting neatly alongside initiatives such as the government’s Digital ID Trust Framework - which focusses on the shareability of digital ID amongst different organisations, including financial and professional services providers - these changes will help to modernise what has long been a clunky and cumbersome process. Manual identity checks can take up to two weeks, contributing to the ever-lengthening property buying and selling process. Digital identity checks can be conducted in a matter of minutes.
But it’s not just about improving the client experience. Central to this move is the issue of identity fraud and this initiative is likely to significantly reduce the risk of this. Firms meeting the new requirements will be offered a safe harbour by HM Land Registry, which means they will not be pursued in any recourse claims resulting from the registration of a fraudulent transaction.
This is an area of notable concern for solicitors and their compliance teams. Conveyancing has long been seen as an attractive target for fraudsters and we often hear of firms falling foul of their regulatory obligations. Back in November, for example, this very publication reported that a legal services firm that failed to carry out sufficient identity checks on conveyancing transactions was fined £14,000 by the Solicitors Regulation Authority. The pandemic has provided even more fertile ground for fraudsters, with a combination of firms transitioning to remote working, social distancing measures making client due-diligence more complicated and a turbulent economy providing a greater incentive. As a result, firms are doing more than ever to ensure the systems they have in place are robust and fit for purpose.
Against this backdrop, there has been a rapid shift from manual to digital ID checks within the profession, yet without a standard in digital ID, it’s been down to individual firms to determine whether the tools they are utilising are sufficient to protect their business and clients from fraud. This announcement is therefore timely indeed and with these new standards, conveyancing will arguably lead the way when it comes to the use of digital ID.
The digital ID standard is effective immediately and based on the guidelines set out in the government’s Good Practice Guide (GPG) 45, setting a high threshold for conveyancing firms. E-ID 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. HM Land Registry has made it clear that it does not expect an immediate take-up of digital identity tools. Indeed, it’s likely that many providers won’t yet meet the requirements meaning that, in turn, many law firms will fall short of what’s required by HMLR. Take, for example, NFC, which is a secure way of remotely determining the authenticity of identity documents, such as passports, but requires providers to have a native app, as opposed to an online portal. Land Registry has stipulated that as well as conducting an NFC chip-scan, digital ID providers must go a step further and cryptographically verify the NFC chip as government issued. This will constitute a step up for many, utilising the same kind of ID verification technology as the likes of Home Office. Though HM Land Registry has been careful to stress that the 'published requirements are not mandatory', the benefits of meeting them are clear.
Ultimately, HM Land Registry carries enormous influence, so as well as giving much needed clarity to conveyancing firms, it’s likely that the digital ID standard will help to drive the use of digital ID, which is a welcome development. From cutting fraud risk, to saving conveyancers and their clients valuable time and money, digital ID verification is the future and it’s hugely positive that conveyancing is at the forefront of this trend.
Sam Ruback is head of legal at Thirdfort and previously a white collar crime litigator at Mishcon de Reya. Marcus Shepherd is risk and compliance manager at Penningtons Manches Cooper