The MFAA, ABA, Gadens Lawyers, and a number of lenders have been holding discussions with WA Landgate regarding the verification of identity (VOI) procedures for mortgagees. This report provides the outcome of those discussions.
The procedures were set out in a Joint Practice Statement dated 20 June 2012. Gadens summary of the Practice Statement can be accessed
here, and the Practice Statement can be accessed at
http://www.landgate.wa.gov.au/docvault.nsf/web/PS_CIB/$FILE/VOI_Practice_WA-20June2012.pdf Executive summary - Compliance is compulsory for mortgages lodged for registration on or after 2 January 2013.
- A form of certificate for use by mortgagees and mortgagee’s lawyers has been provided.
- Mortgagees will need to decide what system they will use to conduct VOI.
- Lawyers will need to review and approve each mortgagee’s VOI procedures.
- The rules only apply to mortgages lodged in WA, but they apply wherever the mortgagor is resident.
Full compliance Full compliance with the VOI requirements apply to documents lodged for registration after 2 January 2013. Accordingly, it is appropriate to start collecting information as soon as practicable as loans being documented now may be lodged for registration on or after 2 January 2013. In addition, on or about 10 December 2012 pipeline loans should be reviewed to identify mortgages where VOI has not been conducted and which may be lodged for registration on or after 2 January 2013.
Form of certification Landgate will soon make available a form of verification as part of a new mortgage document. Mortgagees and lawyers can use their own mortgage form and will need to obtain approval for it.
There are two forms of statement, appearing at the end of this report.
Industry expressed concerns about a number of matters relating to the certificate, as follows.
1. The apparent duplication in the three statements in the proposed form.
Landgate maintains that the three statements are required because VOI is not
intended to be a ‘tick and flick’ process, but rather one to which mortgagees
are required to pay appropriate attention. The three statements are designed
to obtain an assurance that the mortgagee:
- has taken all reasonable steps to verify the identity of the mortgagor;
- after taking those steps reasonably believes that the identification has been
properly conducted; and
- believes that the mortgagor is entitled to grant the mortgage over the land.
2. The practical inconvenience of having to specify the date on which the VOI was
conducted. Landgate maintains that this is important information to enable
them to prepare statistics and to subsequently investigate alleged forgeries or
frauds.
3. Lawyers would have difficulty forming the “reasonable belief” that the
mortgagee has taken the three steps. Industry requested that instead lawyers
certify that the mortgagee has informed the lawyer that the VOI has been
undertaken. This submission was rejected by Landgate. Accordingly lawyers
will need to review the procedures undertaken by mortgagees and will need to
reasonably satisfy themselves that those procedures are appropriate. It will
not be necessary for lawyers to review the procedures in respect of each
individual transaction. For example, Gadens could satisfy itself once as to the
procedures adopted by a particular mortgagee and accept an assurance that
those procedures will be followed in relation to all transactions. We
recommended that this assurance is reviewed at least every six months.
4. Lawyers may not be covered by their professional indemnity insurance as they
are undertaking an additional contractual liability. As there is no contractual
liability for this procedure (as distinct from the type of contract which might be
entered into if a lawyer appointed a third party to conduct the VOI), and given
the form of the certification, it is likely this activity will be covered by the normal
PI insurance. (There may still be difficulties for lawyers certifying on behalf of
vendors).
5. Clarification on the procedures for attorneys. VOI is to be conducted in
respect of the attorney and not the donor. Note that donors under powers of
attorney will be subject to VOI when the power of attorney is lodged for
registration (except for enduring powers of attorney). In this context it is
relevant to note that the signatories for companies must be identified.
6. Paragraph 4.3 of the Joint Practice states that the identification must be
conducted after the panel lawyer is instructed. Landgate stated that it is
acceptable for the VOI to be conducted by mortgagees prior to lawyers being
instructed, so long as the lawyer, after receiving instructions, forms a
reasonable belief that the VOI has been conducted.
Conducting VOI
Landgate is keen to ensure that there is an appropriate link between the person identified and the person who actually signs the mortgage. The Joint Practice states that signatures should be compared or the person conducting the VOI should be the witness. However these are recommendations only, and a mortgagee or a lawyer can otherwise form the view that they have a reasonable belief that the person who signed is the person who was identified.
The Joint Practice recommends that the identification should occur by a face to face interview comparing photographic evidence with a face. Landgate stated that generally AML/CTF procedures would not be rigorous enough to satisfy VOI, but mortgagees may adopt the view that their AML/CTF procedures are sufficiently rigorous. The point here is that the mortgagee or the lawyer has to certify that there were reasonable steps taken to verify the identity of the mortgagor and to enable the certificate in the mortgage to be given.
Adopt new procedures nowGadens lawyers can help you prepare procedures for compliance. It is important to act promptly as mortgages lodged for registration on or after 2 January 2013 are likely to be rejected if they are not supported by appropriate VOI.
Form of verification when mortgagee signs document (PDF)
Form of Certificate when Lawyer makes Statement (PDF)