Verification of identity. When is reasonable, unreasonable?
The COVID-19 pandemic has reignited the discussions of transforming the verification of identity (VOI) standards for financiers, legal practitioners and conveyancers in Australia. The difficulties of balancing the commercial reality of efficiency and face-to-face verification at first glance appears counter-intuitive. However, a balanced approach may provide greater certainty and protection for all parties involved in future transactions.
Currently, the Australian Registrars’ National Electronic Conveyancing Council’s (ARNECC) Model Participation Rules (Rules) requires Subscribers to, at a minimum, take reasonable steps to verify the identity of its mortgagors.
Pursuant to these Rules, lenders must either:
- apply the VOI Identity Standard; or
- verify the identity of a Person in some other way that can be considered as taking reasonable steps.
The VOI Identity Standard, or ‘safe harbour’, prescribes:
- a face-to-face in-person interview;
- where the verifying agent conducting the interview is satisfied that the person being identified bears a reasonable likeness to the person depicted in the photos of identification documents provided; and
- that the identification documents provided meet one of the outlined categories.
ARNECC understood the health concerns regarding this face-to-face identity verification regime and as a result confirmed that strict compliance with the Identity Standard is not mandatory under the Rules. This enables Subscriber’s to determine what constitutes reasonable steps, including the use of video technology as part of the verification of identity process.
The use of digital tools has enabled the mortgage industry to continue functioning effectively in a pandemic world. Should ARNECC transition away from the adoption of technology and the modernisation of the mortgage industry in a post-pandemic world, they would re-introduce archaic difficulties to Australian consumers and lender alike.
Undoubtably, the social distancing measures encouraged the rapid adoption of digital VOI solutions. Custom VOI solutions have been developed to streamline the verification process. Compliance advocates have promoted this user-friendly approach as a risk mitigation tool with no greater risks in comparison to physical identification processes. In the context of a post-pandemic economic recovery, digital VOI arrangements are crucial. Consider circumstances where borrowers reside in remote communities and must refinance their current mortgage to consolidate pandemic-related debt. Borrowers being unable to physically meet with their broker, lenders would be unable to provide the financial support needed to assist their borrowers. However, if the current, and reasonable, arrangements continue, lenders can successfully rely on digital VOI processes that are readily achievable.
Similarly, solicitors and conveyancers have also benefited from digital VOI arrangements when identifying their clients. The introduction of a dynamic identification process, where identification reports are securely held indefinitely, provides clients with certainty that their representatives are protecting their personal privacy. These representatives must take reasonable steps to verify the identity of their clients to comply with their obligations and avoid claims that may arise as a result of inadequate processes. Not only has digital VOI provided a solution to VOI requirements during COVID-19 restrictions, it has been a more convenient process that consumers have had the ability to conduct in the comfort of their own home.
The lending, legal and conveyancing industries adapted to the challenges of 2020. Manual processes were converted within a digital environment lead by business transformation initiatives. Work from home arrangements were defined within the bounds of regular business operations. Sophisticated solutions were developed to provide consumers with an ease of access to solutions in a time of great difficulties.
Looking forward to 2021, Purcell Partners advocates the continuing adoption of technology-focused solutions to enrich the experience of our clients. Purcell Partners has been at the forefront of developing these innovative solutions for our lender-clients. Please contact our Business Development Team to discuss how our VOI Solution, XPRESS ID, can assist your team.