I sometimes start off my column by apologising (I know – not normal for a lawyer) because I have returned to a topic again. I am going to do the same thing this column but this time I don’t think I will apologise. I want to return to the difficult and frustrating topic of identification (ID) because I believe there is potentially a lack of understanding and therefore misunderstanding in the mortgage industry about the need to obtain ID and what is or is not unacceptable.
Of course, we all know that if you are a relevant business carrying out a relevant activity under the Money Laundering Regulations then you are caught by the provisions and you have to satisfy yourself on the ID of your clients. It is clear that not only lenders but also many brokers and all lawyers are subject to the regulations and the vast majority of brokers need to establish ID – not just because of the Money Laundering Regulations but also under the provisions of the FSA guidelines of knowing your client.
Black art
As we all know, establishing ID is not only a very time-consuming process but it is something of a black art and not a science. We all have stories of borrowers being asked on multiple occasions by their broker, lender and then lawyer for ID, only to be told by the last in line (the lawyer of course) that the ID submitted is not acceptable, etc and nothing winds up the customer more than to be asked continuously for the same thing.
As in every service field these days, however, it seems that technology may be coming to our collective assistance in that verification by electronic ID search is becoming more and more common. There are obvious attractions to this facility as it then negates the need for original ID to be checked or, even worse, to be sent through the post with the obvious risks of items going missing.
A word of wisdom or warning here however – it is the service providers’ responsibility to ensure they have satisfactory ID and you need to be happy that the company conducting the electronic ID is doing exactly that. You cannot delegate your responsibilities under the regulations so please be confident the company is doing the right searches and a proper job. In addition to the Money Laundering Regulations, we are also subject to the Proceeds of Crime Act and if you don’t see original ID, how do you check the clients’ signature for the general purpose of fraudulent or criminal activity?
ID checks
This also brings me onto the other area where I would just ask you to stop and think. More and more lenders, who have been looking at electronic ID, are now saying to brokers they don’t need to carry out any checks for them.
This is fine, insofar as it is up to the lender whether they ask the broker to do this or not – but the fact that the lender no longer requires you to check or arrange
ID for them doesn’t mean this negates you collecting ID under the Money Laundering Regulations, or FSA rules.
If, for example, the police visited your offices some time after a completion of a mortgage application and alleged the client had been charged under the Proceeds of
Crime Act and you were not able to confirm that ID had been checked by you, then I don’t think it would be received very well.
As is pretty much the case in business, it is generally better to wait for things to settle down in terms of new policy and not be a trail blazer, because trail blazers can sometimes get burnt.
Eddie Goldsmith is a senior partner in law firm Goldsmith Williams
