Australia: Changes to verification of identity requirements for mortgagors of land in NSW

Introduction

In New South Wales (NSW), new requirements for verification of the identity of mortgagors will apply from 1 January 2015.

The changes are intended to align NSW statutory requirements for verification of identity of mortgagors with the verification of identity standard under the Electronic Conveyancing National Law (NSW) (ECNL). Similar requirements have already been introduced in Victoria, South Australia and Western Australia.

Most significantly, this will require the mortgagee or its appropriately qualified agent to undertake a face to face interview with each person who is to sign as or for a mortgagor.

Background - NSW verification of identity requirements for mortgagors

Section 56C of the Real Property Act 1900 (NSW) requires a mortgagee of land to take reasonable steps to ensure that the person who executed the mortgage, or on whose behalf the mortgage was executed, as mortgagor, is the same person who is, or is to become, the registered proprietor of the land that is security for the payment of the debt to which the mortgage relates.

The Real Property Regulations 2014 (NSW) (Regulations) prescribe what are considered "reasonable steps" for the purposes of section 56C. Currently, a mortgagee will be considered to have taken "reasonable steps" if it obtains certain information from the mortgagor which is prescribed in the Regulations or has complied with identification procedures under Commonwealth anti-money laundering legislation.

From 1 January 2015, in NSW a mortgagee will only be considered to have taken "reasonable steps" if it complies with the Verification of Identity Standard set out in the Participation Rules established under the ECNL. The Participation Rules for NSW are determined by the Registrar-General . They were last published on 1 September 2014 and became effective on 1 October 2014 (Rules).

What will change in practice?

The most significant difference between the existing and the new requirements in NSW is the need for the mortgagee (or its appropriately qualified agent) to undertake a face to face interview with each individual who is to sign as or for the mortgagor.

At the interview, the mortgagor must provide original current identification documents of a kind specified in the Rules. There are five categories of documents and a lower category document can only be used where a higher category document is not available. For example, category 1 requires: Australian Passport or foreign passport and an Australian visa grant notice evidencing an Australian resident visa plus Australian drivers licence or Photo Card plus change of name or marriage certificate if necessary. Details of the categories are set out in the table below.

Where the identification includes photographs, the mortgagee or its agent must be satisfied that the person being identified bears a reasonable likeness to the person depicted in those photographs.

When can verification of identity take place?

Verification of identity must take place before the mortgage is lodged for registration in NSW.

There is no need for the mortgage to be signed in the presence of the verifier (or at the time verification of identity takes place). However, if this is not done, as a practical matter, the mortgagee would need to satisfy itself that the person who actually signed the mortgage was the same person whose identity was verified by the mortgagee.

Additional requirements for companies

Where the mortgagor is a company, the mortgagee or agent must confirm the existence and identity of the company by way of an ASIC search or search obtained from another body with which the company is required to be registered, take reasonable steps to establish who is authorised to sign or affix a seal on behalf of the body and verify the identity of each individual who is to sign (by face to face interview in accordance with the requirements described above).

Additional requirements for attorneys

For attorneys signing on behalf of individual or corporate mortgagors, the mortgagee or its agent must confirm details of the attorney and the donor from the power, take reasonable steps to confirm that the transaction is authorised by the power and verify the identity of the attorney (by face to face interview in accordance with the requirements described above). Where the attorney is a body corporate, the rules above for identifying the body corporate must also be followed.

Identifying a person located outside Australia

Where a person is outside Australia, identification must take place in person by the mortgagee or its agent or by an Australian Consular Official or Australian Diplomatic Officer. Separate requirements apply if the person being identified is a member of the Australian Defence Force.

Use of an agent by the mortgagee

A mortgagee can appoint an agent to undertake the verification of identity on its behalf. However, the agent must have the requisite insurance cover or must be a legal practitioner or licenced conveyancer with professional indemnity insurance who makes contributions to a fidelity fund. The agent is required to provide written certification that the verification of identity has been completed in accordance with the required standard.

Are there any exemptions?

Yes. Where the person signing as or for the mortgagor has had their identity verified by the mortgagee within the last 2 years, the identity of that person does not need to be verified in respect of a further mortgage executed within that time.

What should mortgagees be doing in preparation for the change?

Mortgagees should:

  • ensure they are familiar with the Rules and in particular, the categories of identification documents which are required to be provided by the mortgagor;
  • update current practices to address the requirement for a face to face interview with each person signing as or for a mortgagor;
  • if mortgages will be executed before or after verification, ensure that practices are put in place to check that the person who signed the mortgage is in fact the same person whose identity was verified;
  • consider whether the mortgagee will be using an agent to undertake the verification of identity (either some of all of the time) and if so, who it will appoint for that purpose (also ensuring the agent is appropriately qualified);
  • ensure that transaction timetables will take into account the verification of identity requirements, particularly where individuals are outside Australia, so that all parties to a transaction can plan for addressing the requirements and any potential delays; and
  • remember that there are some differences between the requirements for verification of identity across the various Australian jurisdictions so processes addressing compliance with one regime will not guarantee compliance with another.

Category

Minimum Document Requirements
For Persons who are Australian citizens or residents

1

Australian Passport or foreign passport and an Australian visa grant notice
evidencing an Australian resident visa
plus Australian drivers licence or Photo Card
plus change of name or marriage certificate if necessary

2

Australian Passport or foreign passport and an Australian visa grant notice
evidencing an Australian resident visa
plus full birth certificate or citizenship certificate or descent certificate
plus Medicare or Centrelink or Department of Veterans' Affairs card
plus change of name or marriage certificate if necessary

3

Australian drivers licence or Photo Card
plus full birth certificate or citizenship certificate or descent certificate
plus Medicare or Centrelink or Department of Veterans' Affairs card
plus change of name or marriage certificate if necessary

4

(a). Identifier Declaration
plus full birth certificate or citizenship certificate or descent certificate
plus Medicare or Centrelink or Department of Veterans' Affairs card
plus change of name or marriage certificate if necessary.

(b). Identifier Declaration by a Person specified in Verification of Identity
Standard paragraph 4.4(e)
plus Medicare or Centrelink or Department of Veterans' Affairs card
plus change of name or marriage certificate if necessary.

Note: this category caters for persons without adequate identification documents. There are strict requirements for the person who is making the identifier declaration, including that the declarant must have known the person being identified for more than 12 months, must attend the same face to face interview as the person whose identity is being verified and in the case of 4(b), must hold a qualification specified in the Rules.

For persons who are not Australian citizens or residents

5

(a). Foreign passport
plus another form of government issued photographic identity Document
plus change of name or marriage certificate if necessary
(b). Foreign passport
plus full birth certificate
plus another form of government issued identity Document
plus change of name or marriage certificate if necessary.

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