Digital Identity Checks – is now the time?

ARTICLE

Digital Identity Checks – is now the time?

The Law Society, the Chartered Institute for Legal Executives and the Council for Licensed Conveyancers have been investigating the potential for digital identity verification tools. The COVID-19 crisis as well as the advancements generally in technology has fast-tracked the mechanisms for a more secure, efficient and convenient means of identifying parties to a transaction. Although techniques for facial recognition against a passport are available in many areas including through smart phones now, they are not available for conveyancers. Ensuring you ‘Know your Client’ and who you are dealing within an increasingly digital era is essential. The expectation that your client would be locally based and able to come in and see you is very much outdated and it is to be expected that a large proportion of clients will not be within sensible travelling distance of the conveyancer they engage. The verification of the client is vitally important to the trust and confidence in the registration of land at HM Land Registry and in the conveyancing process in general.

A series of events with conveyancers, identity service providers and others through the summer months has led to a draft set of requirements being produced which are aimed at encouraging digital identity checks. The virtual events brought together conveyancers and technology suppliers to collect data as to what solutions would be achievable and what barriers may be in place which need to be overcome. It was apparent that the technology already exists to meet the needs and give the security that is required to the conveyancer, the business sector and the consumer. The conclusion was that the pandemic has provided a very strong catalyst for the development of this arena and that the conveyancing market would benefit from it and welcome it.

The draft set of requirements is:

Encouraging the use of digital technology in identity verification

There is widespread demand across the conveyancing market for more resilient, straightforward and convenient identity verification solutions.

We believe that there is scope for an alternative higher standard of identity check – one that uses biometric and cryptographic technology, is defined and gives clarity and certainty to the conveyancer that they have discharged their duty on identity verification in connection with land registration applications.

The guidance below does not deal with identity checks required by regulatory or representative bodies, or required by law, such as under the money laundering legislation.

The Safe Harbour Standard

The enhanced level of check is defined by reference to a set of requirements, collectively known as the “Safe Harbour Standard”. The Safe Harbour Standard is founded on the principles within the Government’s Good Practice Guide GPG45. The requirements involve biometric and cryptographic checking of identity and verification that the individual or individuals signing of behalf of corporations are the owner of the property or otherwise a genuine party to a registrable transaction.

The Safe Harbour Standard when followed, constitutes what is regarded by HM Land Registry as a discharge of the duty to verify the identity of a party to a registrable transaction.

A conveyancer who adopts this approach will have fulfilled their obligation to take reasonable steps in relation to the requirement to verify their client’s identity and will reach the “Safe Harbour”. This means that if a conveyancer carries out the steps described in the Standard, HM Land Registry will not pursue any recourse claim against the conveyancer resulting from the registration of a fraudulent transaction on the grounds that identity checks were inadequate.

The conditions for meeting the Safe Harbour Standard are set out below.

Requirements 1 to 3 must be carried out by all conveyancers acting for a party to the transaction. Requirement 4 is an additional check to be carried out by the conveyancer who represents a transferor, lessor or borrower in the transaction.

Requirement 1 – Obtain evidence

You must find out if the person you are representing is who they say they are.

To meet this requirement, they must hold a form of evidence that can be checked by interrogating cryptographic security features within that evidence. The security features must include an electronically held photo of the identity against which biometric facial recognition checks may be made.

Acceptable forms of evidence that meet these requirements are:

■ biometric passports that meet the International Civil Aviation Organisation (ICAO) specifications for e-passports;

■ identity cards from an EU or EEA (European Economic Area) country that follow the Council Regulation (EC) No 2252/2004 standards and contain biometric information; and

■ a UK biometric residence permit.

Requirement 2 – Check the evidence

You must check that the evidence that meets the first requirement is genuine to ensure it has not been forged and is still current.

You can do this by using an identity check provider to verify for you that the documentary and cryptographic security features of the evidence are genuine.

The identity check provider’s system must read the chip within the evidence using Near Field Communication by providing any required cryptographic keys and then:

■ check the digital signature is correct for the organisation that issued the evidence;

■ check the signing key belongs to the organisation and hasn’t been revoked; and

■ extract the biometric information needed for requirement 3.

Requirement 3 – Match the evidence to the identity

You must check that the person presenting the information matches the photo in the evidence provided. You must do this by using an identity check provider to make sure that the biometric information captured from a ‘liveness check’ (explained below) matches biometric information in the chip within the genuine evidence you have obtained.

To meet this requirement the identity check provider must:

■ use photographs or video (that are captured live as part of the checking process) of the person presenting the information performing tasks to confirm the person presenting the information is real (known as an enhanced ‘liveness’ test);

■ ensure the person’s biometric information is captured under controlled conditions that do not reduce the accuracy of the type of biometric check being used (light, noise, and humidity impact the success rates for face biometrics and should be adjusted if needed);

■ use a biometric algorithm that’s been proven to be effective against a recognised benchmark, like the National Institute of Standard and Technology’s (NIST’s) face recognition vendor test guidance; and

■ have a false match (where the system has incorrectly identified the individual) of a maximum rate of 0.01%.

Requirement 4 – Obtain evidence to ensure the transferor, borrower or lessor is the same person as the owner

This requirement needs to be met by the conveyancer representing a transferor, borrower or lessor.

You must connect the client to the property by obtaining two examples from the following list of evidence types and checking that the name and address of the person claiming the identity match those on the evidence provided:

■ Utility bill, bank or building society statement, dated within the last three months

■ Local authority council tax bill for the current financial year

■ Original mortgage statement from a recognised lender for the last full year

■ Current UK or EEA photocard driving licence

■ HMRC self-assessment letters or tax demands dated within the current financial year

■ Insurance policy schedule for the property

■ Current firearm or shotgun certificate

■ Credit card bearing the Mastercard or Visa logo, an American Express or Diners Club card, or a debit or multi-function card bearing the Maestro or Visa logo which was issued in the United Kingdom and is supported by an account statement less than three months old.

■ Copy of the agreement for purchase of the property

■ Lettings agent agreement on headed paper

■ Local authority buildings regulations sign off for works undertaken to the property addressed to the client

■ Management company service charge demands for the property addressed to the client.

The statements referred to in the list above can be postal or online statements. Reliance can be placed on an online statement provided it is evident that it has been received or downloaded by the client and refers to the subject property. Screenshots of online statements will not satisfy the Standard.

Achieving the Safe Harbour Standard

Schedule 8 to the Land Registration Act 2002 (“the Act”) provides for compensation to be paid to a person who can show that they have suffered loss as a result of a mistake in the register on an indemnity basis. This includes where a fraudulent transaction is registered.

Under paragraph 10 of Schedule 8 to the Act, HM Land Registry has a statutory right to recover from conveyancers compensation paid by it in certain circumstances. This includes cases where compensation has been paid as a result of fraud.

A conveyancer who carries out the requirements set out above to achieve the Safe Harbour Standard should remain vigilant during the remaining course of the transaction.

If, at any time prior to the completion of the transaction, the conveyancer has (1) reasonable doubt about the checks they have conducted, or (2) has reason to believe the characteristics of the transaction itself indicate the parties they represent may not be genuine, then they should make further enquiries and seek further evidence, as appropriate, to ensure those doubts are removed. They must make a record of the results of those further checks and enquiries. Where there is reasonable doubt and it is not positively resolved, the Safe Harbour Standard will not be achieved.

It is acknowledged that it may not always be possible to conduct all the steps set out in the Safe Harbour Standard in every transaction. Where it is not practicable to carry out these enhanced checks, or resolve any doubts around the checks, the conveyancer will not reach the Safe Harbour Standard. In these circumstances, the conveyancer may remain at some risk of HM Land Registry seeking recourse if it turns out the transaction was indeed fraudulent and the conveyancer has been either negligent or fraudulent in relation to the checking of identity.

HM Land Registry gave an assurance to Parliament in 2001 that it would not use the right of recourse against those who are neither fraudulent nor negligent. HM Land Registry must satisfy itself that there has indeed been fraud or negligence before seeking recourse against a conveyancer.

Land Registry are requesting feedback from conveyancers by close of business on Friday 11 December 2020 at the following location: https://forms.office.com/Pages/ResponsePage.aspx?id=qAl- jI0soV06ns_x2dzb2ndmYqM40Z99Ml3iBQgNHCwtUMEpKM- VFYQlc0T1BBTUpBSllFVTFKMTJCNCQlQCN0PWcu ■