Verification of Identity Checks in the Age of Social Distancing

The 2019 novel coronavirus disease (COVID-19) has seen Australia’s governments respond by encouraging social distancing and imposing strict self-isolation rules for people at risk and now shutdowns, in a bid to manage the rate of infection in our communities and the broader economic impacts (see Department of Health: Coronavirus (COVID-19): Information on social distancing and Isolation guidance).

We have also witnessed Australian businesses introduce various safeguards and changes to usual practices to protect the health of their staff while ensuring business continuity as much as possible. These strategies are in line with the approach taken by many countries around the world. In the real estate and banking sectors, one question that needs to be considered is how lawyers and mortgagees should act to comply with the verification of identity (VOI) requirements applying to conveyancing transactions during this ever-evolving climate. In this article ‘conveyancing transactions’ includes mortgage transactions.

What are the current VOI requirements?

VOI requirements apply to electronic and paper land dealings in most Australian jurisdictions and are designed to reduce fraudulent transactions relating to land.

Electronic transactions

When it comes to electronic land transactions, subscribers (who are generally legal practitioners or mortgagees) must take reasonable steps to verify the identity of their clients, mortgagors or persons provided with certificates of title (as relevant). To do so, the subscriber can carry out either of the following:

  • Apply the VOI Standard in the Australian Registrars’ National Electronic Conveyancing Council (ARNECC) Model Participation Rules (safe harbour procedures).
  • Verify the person’s identity in some other way that constitutes the taking of reasonable steps (reasonable steps approach).

Complying with the VOI Standard is usually enough for a subscriber to satisfy its obligations under the Model Participation Rules. For a subscriber to satisfy the VOI Standard, the following steps are required:

  • Step 1: A face-to-face in-person interview between the person conducting the VOI (identity verifier) and the person being identified.
  • Step 2: The person being identified producing current, original documents as required in the Model Participation Rules for the identity verifier to sight and retain a copy.

Alternatively, a subscriber can verify a person’s identity in some other way that constitutes taking reasonable steps. These are such steps as an ordinarily prudent subscriber would have taken in the circumstances and in the ordinary course of their business.

Subscribers must also obtain a client authorisation before they digitally sign any electronic documents on an electronic lodgement network (ELN). Wherever possible, the client authorisation should be signed by the person being identified at the same time that the VOI is carried out.

Paper transactions

In most jurisdictions, the VOI requirements for paper conveyancing transactions, while separately mandated, are essentially the same as those in the Model Participation Rules.

Impacts of social distancing and self-isolation rules on VOI

The VOI requirements can involve, at the very least, a moderate degree of human interaction, while social distancing and self-isolation require little to no contact with other people.

This brings about several practical challenges for lawyers and mortgagees who need to conduct VOI to keep conveyancing transactions moving forward, especially as failure to do so carries serious professional and legal consequences. However, in complying with its VOI obligations, it is becoming increasingly vital for lawyers and mortgagees to consider the health and wellbeing of its employees, clients, colleagues and the broader public.

Challenges of social distancing protocols

Since the VOI requirements were introduced, the general approach has been for subscribers to comply with the VOI Standard. In doing so, subscribers are generally deemed to satisfy their reasonable steps obligation.

Social distancing protocols now pose some challenges to the application of the VOI Standard, in particular:

  • Ensuring the personal safety of the identity verifier and the person being identified.
  • Timely verification of parties who are required to self-isolate (for example, if they have recently returned from overseas) and are not available for a face-to-face interview before documents are required to be signed and certified for settlement. This may be particularly relevant for companies with few people authorised to deal on a transaction.

“If social distancing and self-isolation rules become even stricter, as we have seen in countries like Italy and the United States, then face-to-face interviews may be completely out of the question for all parties”

– Michelle Tat, Senior Writer, Practical Law

What about workplace requirements?

Even though the government has not currently banned workers from attending their places of employment, some businesses have introduced precautionary remote working protocols for most of, if not all, their staff. For example, this has been the approach taken by most BigLaw firms to date.

As a result, a person may find themselves in a tricky position in terms of abiding by their organisation’s COVID-19 health and safety protocols versus their need to carry out, or participate in, a VOI process. The previous practice of junior lawyers running around town going to VOI meetings will now likely become a matter of scrutiny.

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Practical considerations when conducting VOI

In light of the government’s present stance on social distancing and self-isolation, there are various matters that parties can consider when determining how they should best comply with their VOI obligations for conveyancing transactions. The impact of COVID-19 is a very fluid situation and any suggested considerations or best practice responses are obviously subject to governmental advice to the contrary.

Whether to apply the VOI Standard

Even though the VOI Standard is not currently mandatory, its safe harbour treatment gives a good degree of certainty to lawyers and mortgagees that they have complied with their VOI obligations.

At the time of writing, it is not impossible to apply the VOI Standard while abiding by the government’s social distancing rules. However, its appropriateness for a conveyancing transaction needs to be carefully considered on a case-by-case basis. On the other hand, a party in self-isolation will generally not be able to apply the VOI Standard since a face-to-face in-person interview cannot take place.

Some practical considerations for a person seeking to apply the VOI Standard in the current circumstances include:

  • For an identity verifier to carry out a face-to-face interview:
    • check that the person whose identity is being verified has not recently travelled overseas, has not come into close contact with a suspected or positive case of COVID-19 and is not showing COVID-19 symptoms;
    • exercise social distancing as far as practicable, for example, by maintaining an appropriate distance between parties;
    • meet in an outdoor location if possible; and
    • exercise good hand hygiene immediately before and after conducting the VOI, particularly when handling original identity documents.
  • A lawyer or mortgagee who cannot personally conduct a VOI because, for example, they are in self-isolation, may engage an identity agent to apply the VOI Standard (see ARNECC: Identity Agents).

Taking the reasonable steps approach

While the reasonable steps approach is not safe harbour, it gives lawyers and mortgagees a degree of flexibility to use their professional judgment on how to identify an individual in any particular circumstance. This will become especially relevant if person-to-person contact is further restricted for public health and safety reasons during the COVID-19 pandemic.

Below are some practical considerations for a person seeking to take the reasonable steps approach in the current circumstances where a face-to-face interview cannot be carried out:

  • Conduct the VOI virtually (for example, via a secure videoconferencing service like Skype) with further steps to satisfy yourself of the person’s identity.
  • When carrying out the VOI virtually:
    • obtain scanned copies of a person’s identity documents and require that person to “hold up” those documents for virtual inspection;
    • obtain more identity documents than are strictly required (for example, an Australian driver licence, Australian passport and an Australian Medicare card); and
    • require the person to sign the client authorisation form electronically in a manner that complies with the relevant Electronic Transactions Act or using a wet signature for you to see virtually. For further information about electronic signing of documents, see Practical Law’s Practice note, Electronic signatures.
  • Use an online verification service (for example, IDfy or WebVOI via Infotrack).
  • Maintain a written record of the reasons for not applying the VOI Standard and the steps taken to verify a person’s identity.
  • When it becomes safe to do so, obtain certified copies of the identity documents of the person whose identity was verified virtually.

These are in line with some of ARNECC’s examples of further steps that can be taken for conducting a VOI (see section 5.5 of ARNECC: Model Participation Rules Guidance Note #2 – Verification of Identity). In response to COVID-19, ARNECC has specifically acknowledged that subscribers might consider using video technology as part of the VOI process and should retain evidence supporting the reasonable steps taken to verify the client’s identity (see ARNECC: Client Authorisation and Verification of Identity as a result of COVID-19 (March 2020)).

Copies of a person’s identity documents must be securely stored and all relevant privacy laws must be observed. Prior permission should be obtained if you intend to record the video conference as further evidence of the steps taken.

Proposed changes to the Model Participation Rules

Proposed changes in version six of the Model Participation Rules that are likely to take effect in July this year, will require a subscriber, or a mortgagee represented by the subscriber, to apply the VOI Standard, or if reasonably satisfied that the VOI Standard cannot be applied, verify the identity of a person in some other way that constitutes the taking of reasonable steps. If enacted, these changes essentially mandate the use of the VOI Standard unless a person is reasonably satisfied it cannot be applied.

In the pre-COVID-19 environment, this may not have been a big change from usual practice. However, with the growing challenges of conducting face-to-face interviews in the current COVID-19 landscape, the changes may create some uncertainty as to the point in time where a lawyer or mortgagee can be reasonably satisfied that the VOI Standard cannot be applied. Having said that, it appears unlikely that genuine health and safety concerns would not fit into the category of circumstances where the reasonable steps approach is appropriate.

For further information about the verification of identity requirements in each state and territory, subscribers of Commercial Real Estate on Practical Law can see Practice note, Verification of identity. For a form of VOI checklist, see Standard document, Verification of identity (VOI) checklist.

Not a subscriber of Practical Law, but would like to gain access to a complimentary trial? Simply visit Thomson Reuters Legal.

Michelle joined Practical Law as a Senior Writer in 2020 after more than six years in practice at the international law firm, King & Wood Mallesons. She specialises in a broad range of commercial real estate transactions, including acquisitions and disposals, development projects, joint venture arrangements, real estate investment structuring and commercial leasing.

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