Further to my post about Verification of Identity on
17 December 2014, there is now a proposal to require the same level of
verification for paper transactions as well as electronic transactions.
For consistency between paper and electronic conveyancing,
Land Victoria has introduced a new verification of identity process for any
paper instrument or dealing lodged with Land Victoria.
Lawyers, mortgagees and conveyancers must take
reasonable steps to verify a client's identity.
The Verification Process Simplified
A person must have their identity verified if they are
a party to a paper dealing to be lodged with Land Victoria.
The verification process comprises three key elements:
1. Verification of a person's identity
2. Verification that the person is a legal person
3. Verification that the person has the right to enter into the
transaction.
The Verification Of Identity Interview may be with the
lawyer, the mortgagee or with a third party Identity Agent authorised by
them.
At the Interview, the client must produce original
identification documents (Identity Documents) to formally verify their identity
(Acceptable forms of identity documents include a passport, driver's licence
and a birth or citizenship certificate).
The person conducting the interview is required to
take a copy of these documents, which will be retained for nine years from the
date of the Interview.
Once completed, an Interview remains current for two
years.
Verification of Persons Overseas
Presently there is no formal process to verify the
identity of a person residing out of Australia. I expect that Australian
Consular Officials may be called upon to undertake this task (more details
below).
More than one Paper Dealing
Standard sales and acquisitions of land generally
involve more than one paper dealing to complete the land transaction. For
example, a purchaser of land who borrows money to pay for the purchase will be
need to sign a mortgage and a land transfer.
In that case, both the purchaser's lender and the
purchaser's lawyer will have separate verification requirements that will need
to be satisfied.
I would expect that the lawyer and the lender would
co-ordinate their efforts to minimise unnecessary duplication of the Interview
process.
Who May Perform the Verification of Identity?
The lender, a lawyer or a third party Identity Agent
authorised to undertake the verification (such as Australia Post) may conduct
the Interview.
Mortgagees may use reasonable steps or safe harbour
procedures to identify mortgagors in all jurisdictions for both paper and PEXA
mortgages.
ARNECC Participation Rules – version 3
1. Verification Of
Identity is required for all PEXA dealings as specified in Model
Participation Rules version 3.
2. Mortgagees must
take ‘reasonable steps’ to identify mortgagors (see previous blog on
this issue).
3. If a Subscriber (such as a panel lawyer) is lodging mortgages on behalf
of mortgagees, the Subscriber must be reasonably satisfied that the mortgagee
has taken reasonable steps to verify the identity of each mortgagor – cl
6.5.1(b). As a result, Subscribers will need to ask mortgagees what steps
are taken. This enquiry can relate to the procedure used by mortgagees as
distinct from asking for details of the steps taken on a case by case basis.
4. The rules prescribe a ‘safe harbour’ procedure that can be used called
the ‘Verification of Identity Standard’ – cl 6.5.2. This standard
requires the mortgagee or an approved ‘Identity Verifier’ (such as lawyers, finance
brokers and Australia Post) to conduct a face-to-face interview. If
documents containing photographs are produced, the mortgagee or Identity
Verifier must be satisfied that the person being identified is a reasonable
likeness to the person in the photographs – Schedule 9.
5. Often mortgagees will not know whether a mortgage will be registered
through PEXA or paper. As a result, mortgagees normally also need to comply
with the rules for paper dealings. It is therefore good news that paper
and PEXA processes should be aligned from May 2016.
6. There is no safe harbour prescribed for Verification Of Identities
conducted overseas. However, ARNECC and the Department of Foreign Affairs
and Trade (DFAT) have developed a new arrangement to assist. The VOI service
will be provided by an Australian Embassy, High Commission or Consulate – see MPR Guidance
Note #2 – Verification of Identity (Updated). The service can
be used for both electronic and paper conveyancing.
Procedures
1.
Verification Of Identity for paper dealings now
applies to most dealings for land located in Victoria.
2. Evidence supporting the Verification Of Identity must be retained for
seven years from the date of lodgement of the mortgage.
3. In Victoria, mortgages lodged through PEXA are void if the mortgagee
ceases to retain a copy of the mortgage signed by the mortgagor – s 74(3) Transfer
of Land Act 1958. The copy can be retained electronically. PEXA
mortgages can also be signed electronically.
4. Mortgagees who title insure should ensure that their insurer’s cover
will apply given the process used for VOI.
Conclusion
It seems that we are edging ever closer to the day
when all conveyancing transactions will be conducted electronically. For now,
it seems that the requirements for conducting paper and electronic transactions
are being aligned, to the point where eventually the procedures will be
identical. Then, the inevitable question will be: "Do we need paper
transactions any more?"
WG Stark
Hayden Starke Chambers
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