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Safe as houses

As the digitisation of land registration processes promises to streamline the service clients receive from solicitors and conveyancers, the growing risk of cyber fraud shouldn’t be underestimated. Matthew Rogers reports

1 August 2017

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When the government announced in last year’s Autumn Statement that HM Land Registry (HMLR) would remain in the public sector and was to focus on becoming “a more digital data-driven registration business”, solicitors, conveyancers, and other interested parties rejoiced. Eight months on, plans to digitise the property market have been published by HMLR as it aims to become a world leader in facilitating property transactions. But the journey down the path to greater digitisation will be far from smooth, as stakeholders explain to Solicitors Journal.

Conveyancing revolution

Digital mortgages take centre stage in HMLR’s reforms with the service to be opened up later this year following positive feedback from borrowers in the private beta stage. The first digital mortgage can be created, signed, and registered without the need for any paperwork or emailing, and without the need for registry staff to be involved in the process. The government’s Verify service will be used to ensure the borrower’s ID is assured before they digitally sign their mortgage deed.

A new pilot scheme called ‘Digital Street’ is also set to be launched this summer and will explore how technologies such as blockchain and artificial intelligence can improve the land register. Through digitising its existing services, underpinned by new IT systems to be implemented over the next five years, HMLR wants to give anyone involved in buying and selling property a faster, smoother system.

Achieving comprehensive digital registration in England and Wales by 2030 remains a long-term goal and for those on the frontline, the advantages are clear. “It will enable the revolution of the conveyancing process,” says Beth Rudolf, director of delivery at the Conveyancing Association (CA), by “helping the passage of information across the process, plus the collection of significant information on the ability of the housing market to evolve.” However, Rudolf anticipates a long, slow process in digitising those documents that aren’t machine-readable.

Businesses such as Search Acumen, which already uses HMLR data to improve its services, are encouraged by the opportunities the digital reforms will present. Managing director Andrew Lloyd says legal professionals will benefit from the greater speed and efficiency when dealing with HMLR but urged the registry to “concentrate on incremental progress, not to attempt too much, too soon”.

Last week, Search Acumen revealed that the average number of completed transactions per conveyancer had risen by 69 per cent in four years – up from 71 transactions in 2012 to 130 in 2016. In that time, the total number of active conveyancers dropped by 11 per cent. Lloyd believes a more accessible and intelligent Land Registry can help firms to meet the demands placed upon them without sacrificing the quality and service their clients increasingly expect.

The Law Society also wants the digital solutions to help solicitors from all types of law firms. Its president, Joe Egan, said Chancery Lane “would like to see digital services being developed in a way that is safe, secure, and practical for solicitors to use, whether they are in large City firms, volume conveyancing operations, or small high-street practices”.

He added that the reforms “could offer significant advantages for clients” and that “a system of electronic or digital signing is something clients will increasingly expect to see”.

Fewer complaints?

According to the most recent statistics from the Legal Ombudsman, conveyancing is the most complained about legal service, with issues around delay and failing to progress accounting for 20 per cent of complaints in 2015/16 – a rise of seven points since 2012/13. With an improved land registration process, Tony Piccirillo, a partner at conveyancing solicitors AVRillo, hopes firms can adopt a more client-focused approach, providing a competent service delivery as well as the service itself.

As lawtech develops, conveyancers will also be much better placed to serve the home owner, according to CA’s Rudolf. “Digitisation will support transparency and upfront provision of information but it’s an incremental process and will need to be mandated to be effective across the whole market. So, even with the whizziest piece of tech, if someone else in the chain is still using their quill pen, then the transaction will only move as fast as the quill. It will need mandating, probably through legislation to get everyone up to speed.”

E-signatures

In April, the CA announced that Convey Law had facilitated the first ever e-signature exchange of contracts for a residential property transaction in the UK. The firm used the Bonafidee e-signature facility to sign the contract for both the sale and purchase element of the transaction. The system allows both lawyers to upload the agreed contract, which is then sent to the seller and the purchaser to sign electronically. It then confirms that the document has been completed with a code taking the place of a signature.

AVRillo’s Piccirillo says digital signatures being accepted by the Land Registry can prove especially beneficial to clients who are overseas. However, he believes fewer solicitors will see their clients to sign documents, which could increase fraud, so further due diligence will be required.

“HMLR has the potential to play a big part in reducing the risk of fraud, I hope that they embrace it. With conveyancers not receiving ‘live signatures’, they will need to continue to be alert and adapt their anti-money laundering and compliance procedures to reassure the public and avoid property fraud.” This could prove tricky for firms which continue to struggle to implement the new 2017 AML regulations, which were introduced last month.

No silver bullet

Cyber theft from law firms is at a record high, with house moves the main target, according to the Solicitors Regulation Authority’s Risk Outlook 2017/18, which revealed that in Q1 2017, £3.2m of client money was stolen as a result of cyber crime – triple the amount year-on-year. Further, more than half the value of all indemnity insurance claims by solicitors relates to conveyancing.

“Cyber fraud is here to stay and it’s up to each firm to adopt the correct procedures and have the training that is needed to know what to look for with each client,” says Piccirillo. “Digital reforms may help in cutting crime, but criminals will always be looking for a way to cheat the system and defraud innocent people.”

So how far can the reforms go towards combating cyber fraud? Search Acumen’s Lloyd says the proposals don’t “automatically present a silver bullet solution, but it’s certainly a step in the right direction”. The increased transparency of external information will improve detection of fraudulent activity, he added, but firms must continue to tighten their own security processes.

Lloyd wants to see HMLR take ownership of personal identification and AML fraud, so more information about potential buyers and sellers would be known. For Rudolf, the implementation of biometric testing ahead of digital signatures will be “vital”.

“We would like to see the ID verification process being completed by the Land Registry at the beginning of the process so that each party can be certain they’re dealing with a genuine person and the registration will be capable of taking place,” she says. “HMLR has much greater access to datasets used to identify fraud and digital signatures, which will mean they’ll have to do this anyway, so why not do it earlier in the process?”

Early doors

The initial responses to the reforms are promising but solicitors and conveyancers are taking a cautious approach early doors. If the registry does take greater responsibility on ID verification and AML fraud, then firms can concentrate on rethinking internal procedures to increase due diligence amid a growing cyber threat, and improve client care. We’re only at the beginning of a digital conveyancing revolution and a bumpy road lies ahead for those lawyers who are slow to adapt. If they can, however, the rewards at the end of the road will be of benefit to all.

Matthew Rogers is a reporter at Solicitors Journal

@lex_progress matthew.rogers@solicitorsjournal.co.uk

Categorised in:

Property Conveyancing

Tagged in:

e-signature e-conveyancing land registry hmlr AML biometric ID verification Digital Street LAW SOCIETY SRA

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Radwan Nasar 1 August 2017

Great article Matthew, but in the case of Bonafidee, our technology has been designed to reduce the growing risk of cyber fraud. Bonafidee’s advanced e-signing facility incorporates ID verification as an instrumental part of the signing process. This enables solicitors to meet their due diligence obligations, reducing the risks of identity theft and online fraud and also negating the need for them to meet their clients to sign documents.