Verification of Identity (VOI) has the potential to adversely affect lenders who are not ADIs or do not have a geographically diverse branch network (whether or not they are ADIs) because they have difficulty conducting face to face identity verification.
Following WA’s implementation of VOI from 1 January 2013, South Australia has indicated that VOI will commence on 1 July 2013. Draft VOI rules have been released for consultation. A copy can be accessed [here doc 10742205].
WA and SA are introducing Verification of Identity as a precursor to the introduction of the national electronic land settlement system (E-conveyancing). It is likely that other states and territories will follow suit in due course so that there are similar VOI requirements for both electronic and paper settlements. A trial of the national system starts in July 2013 with CBA and general implementation expected in July 2014. Accordingly, these developments impact on all lenders who take security over real estate.
ARNECC (Australian Registrars’ National Electronic Conveyancing Council) was created to ensure a consistent national approach to the regulation of national conveyancing and by developing Model Participation Rules. The most recent version of these rules was released in April 2013 and can be accessed [here doc 10783756].
The latest ARNECC rules provide in clause 6.5.1 that if the user of the system (Subscriber) is a mortgagee, and the mortgagor is not separately represented in the system, the mortgagee must ‘take reasonable steps to verify the identity of the mortgagor’. A Subscriber who represents a mortgagee (for example a panel lawyer) need not undertake VOI in respect of mortgagors if the mortgagee has already done so. This contemplates that mortgagees can use their AML/CTF regime if they consider that their AML/CTF regime provides an appropriate verification standard.
The model rules do specify a Verification of Identity Standard. However, the standard is a ‘safe harbour’, and mortgagees can decide to accept another standard provided they are satisfied that the standard comprises ‘reasonable steps to verify the identity of the mortgagor’. This is the current position in Western Australia where the prescribed certificates to be lodged with mortgages do not require the mortgagee to specify that particular steps have been taken.
The adoption of ‘reasonable steps’ allows flexibility for the mortgage industry and is essential to provide a level playing field for mortgagees without a geographically diverse branch network.
The draft South Australian regime follows the ARNECC proposals for mortgagees described above except that they limit the ability to use the procedures to mortgagees who are ADIs. This is an inappropriate restriction and the MFAA and Gadens Lawyers will make appropriate submissions.
The South Australian draft requires VOI for most dealings whereas WA VOI applied only to vendors and mortgagors. This is consistent with ARNECC’s proposals. SA has not (yet) prescribed a form to be lodged with mortgages certifying that VOI has been conducted. We will propose that forms similar to those used in WA are appropriate.