What is the “Safe Harbour” status for legal matters?

Cast your mind only a couple of years back into the past and consider how the vast majority of client anti-money laundering (AML) checks and ID Verifications were performed. Most law practices required clients to come into their office to present admin staff with both a copy of their ID and address. For conveyancers there was the added task of understanding a client’s source of funds, verifying their risk profile, as well as collating and analysing bank statements to satisfy the AML requirements.

Sure, some practices used digital verification systems, the likes of which would take 2-3 days to get back to you with any sort of result. But this was not common practice, this was reserved for practices which proactively took the steps needed to ensure their AML and ID verification was robust and offered extra security. But then, in December 2019, a pandemic hit. A health pandemic like no other seen in a generation. Covid-19 had hit the UK and the effects of it and the subsequent lockdown catapulted the legal sector into a tailspin of technology adoption and future proofing.

Adoption of remote, digital, verification systems became common place. Systems confined to the edges of the legal industry became market leaders, but not because they offered anything new in terms of client AML and ID checks. No, it was because they offered the same basic client due diligence checks as had been carried out in practices but with the addition that it could be done remotely and securely.

For conveyancers, the risk of money laundering and ID fraud is inherently higher than in other areas of law, which is shown in how the professional indemnity premiums for conveyancing heavy firms are higher than those who do not work with property transactions. Because of this inherent high level of risk and there being no real set of rules of guidelines for digital verification systems, Her Majesty’s Land Registry (HMLR) in conjunction with the Law Society and the Solicitors Regulation Authority stepped in and produced a set of guidelines for digital verifications, in the form of a “Digital ID Standard”.

What does ‘Digital ID standard’ mean?

The Land Registry believes it is important that conveyancers have peace of mind while they fulfil their duty on identity verification. This “peace of mind” which the Land Registry had in mind is in the form of an “alternative higher standard identity check”. Broken down, this means that for every verification which is carried out, a “biometric” and “cryptographic” element must be incorporated in the process.

The reason behind the inclusion of these two elements is for two main reasons:

  • Through a biometric scan of both the facial image in the document and the face itself, systems can determine whether the individual is legitimate or not.
  • Setting higher standards for an area of law which is more susceptible to fraud and ensuring system providers offer more than the bear minimum in terms of client AML and ID verifications.

The two key questions are:

  1. What are the benefits to law firms of following this new Digital ID standard?
  2. How does it specifically benefit conveyancers other than offering a more enhanced due diligence check (which alone should be enough)?

The Gold matter standard – Safe Harbour status

For conveyancers who take the necessary steps to follow the process set out in the Digital ID standard, a conveyancer can gain the “Safe Harbour” status for their matter, meaning that the Land Registry would not seek recourse against the conveyancer in the event their client was not who they claimed to be. This applies to both residential and commercial clients.

Why do conveyancers who follow the Digital ID Standard gain Safe Harbour status and others do not? The answer is because they have “fulfilled their obligation to take reasonable steps in relation to the requirement to verify their client’s identity”.

What is the process to gain Safe Harbour status?

  • Gain evidence from the client – The client must hold a form of evidence that can be checked by cryptographic security features (passport, driving licence, ID card). The security features must include an electronically held photo of the client’s identity to enable biometric facial checks.
  • Check the validity of the documents provided – Systems need to ensure that the document provided to them is a genuine document and not a fraudulent copy. Using cryptographic security features within the document, your system should be able to read these features and ensure that the document is real. Along with this, digital verifications systems must be able to read the NFC (near-field communication) data held in the document to match the digital signature and extract biometric information from the evidence supplied by the client.
  • Make sure the evidence provided matches the biometric profile of the client – The system must be able to collate the above information and then biometrically validate the image of the client within the provided documentation with a liveness test and selfie of the individual. A “Liveness Test” uses a photo/video captured during the ID verification process to ensure that the person undertaking the liveness test is real. To meet the standard, the liveness test needs to be taken under controlled good quality conditions to protect against the client trying to spoof the liveness test.  Furthermore, the ID provider must also have a false match rate of below 0.01%.

Once the above requirements have been satisfied and the verification process returns a confirmed “verified” check, a conveyancer will have done everything they could to verify the individual as set out by the Digital ID Standard, so their matter therefore will qualify for the Safe Harbour status.

How will this effect conveyancers and non-conveyancers?

The steps laid out in the Digital ID standard, although not compulsory, offer conveyancers the best opportunity to ensure maximum anti-fraud protection. Digital verification systems, such as Verify 365, are widely being adopted and becoming common place for many law practices. The omission of such systems in client AML and ID verification process can therefore leave lawyers open to fraud and money laundering.

However, the new ID/AML verification platforms are not just useful for property lawyers. The Land Registry developed its standard along with the Law Society of England and Wales and the SRA, and lawyers from across the spectrum should be prepared for similar changes in the near future.

What is the best ID/AML verification platform for solicitors?

Lawtech 365’s AML and ID verification platform, Verify 365, incorporates all the technology required to reach “Safe Harbour” status, while also generating a concise PDF report which lawyers can use for auditing purposes.

Although the process laid out through this article might seem a little lengthy for most, platforms such as Verify 365 can help speed up the entire process while also ensuring compliance to the Digital ID Standard.

As a leading legal technology firm, Verify 365 were the first to comply with the Safe Harbour standard requirements and integrate NFC reading into their platform and they continue to innovate with legal compliance in mind. This ensures that their system consistently delivers a solution which lawyers can rely on.

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