Improving the ID Verification Process
In any high value business, fraud (or the potential for fraud) is a constant; the threat never goes away and in the property industry, despite an upping of the ante in terms of the fraud protection processes and systems firms have in place, this doesn’t stop criminals seeking out potential weak spots and looking to exploit them.
The good news of course is that instances of conveyancing fraud are very low – HM Land Registry paid out on less than 1,000 indemnity claims in 2017/8 – this doesn’t detract in the slightest from the devastating effect such criminality can have on consumers who lose money, but it does mean we (as an industry) take this incredibly seriously and the level of sophistication required by fraudsters in order to be ‘successful’ means they might think twice about going through with it.
Whatever we do put in place however, it won’t stop these attempts, especially when the size of the potential ‘reward’ is so huge. There are all manner of ways in which firms can continue to protect themselves, and key to this are ID protection/checks that do not allow those who purport to be others, getting through the net.
Just recently, we learnt that the Land Registry is to gain wider powers in order to ensure ID verification meets more exacting standards; recommendations from the Law Commission report include mandatory e-ID searches in order to deliver a further protective barrier.
Conveyancing firms who follow the necessary steps as laid out by Land Registry will purportedly not be pursued for losses should a fraudulent transaction be carried out.
I think we all know that the Registry has always had the power to pursue conveyancing firms who acted fraudulently or negligently, but it is rarely used simply because Land Registry pick up the fraud before the registration has been completed – as in the high-profile Dreamvar, Purrunsing, P&P-v-OWC, and Penny Hastings cases, to name but a few. In fact the HM Land Registry Reports and Accounts for 2016/2017 confirms it spotted 50 cases of fraud before they reached the Register.
However, with such a move there have already been many comments made about how this puts the risk back at a conveyancer’s door, but let’s be honest here, that risk has always been there.
There is a combination of issues that make it harder for the honest and diligent conveyancer. The first is that, as good as their own procedures might be, there is no required standard they can be sure has been followed by the conveyancer acting for the seller. Secondly, HM Land Registry has access to far more data around activity in respect of the title and it is this, along with intelligence gained from other frauds, that they use to identify fraud before a registration is affected.
By setting a mandatory minimum standard for ID verification, we do have the opportunity to improve the process, and deliver greater security, for all. But such moves have to be both effective and economical for firms to introduce, especially (as stated above) when there is such a low level of frauds reported. Admittedly, those reported cases make big headlines, and every case is a goal against, but we should not be made to feel as a sector that this is by any means the norm. Far from it.
From the CA’s perspective we welcome the Law Commission’s requirement for industry consultation and already have a meeting in the diary with Land Registry, via the Land Registry Advisory Council, in order to discuss the new requirements and how they might be introduced.
This is not only an opportunity to ask Land Registry to share their fraud alerts but also an opportunity to review how ID is verified across the piece; it gives us a chance to reflect on what is now outmoded, and what technology can bring to reduce the costs of such checks, and to improve the customer experience.
For example, do utility bills and bank statements have any place in the process, given that most are electronic and can be easily forged by the criminals but asking for paper versions puts the honest client to a lot of wasted effort and frustration especially when you think how many different people need to verify their ID in the process?
ID verification – who does it and by what means – has been a key strand of the CA’s overall strategy for some time, and this development means we can push our agenda further, while hopefully delivering a system that not only works for all stakeholders, but using all available data both within the e-ID data sets but also held by HM Land Registry puts the criminals firmly on the back-foot, hindering their ability to commit conveyancing fraud.
Beth Rudolf is Director of Delivery at the Conveyancing Association