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Look, no paper

Look, no paper

By Bianca Pyers

Electronic conveyancing is here to stay – so what about the risk of fraud? The National Electronic Conveyancing Scheme, managed through Property Exchange Australia (PEXA), is finally here, and with it comes the question of whether the system is safe to protect against fraud. The legal profession is only beginning to embrace the use of this technology and settle property transactions online. Yet exactly how secure this technology is will remain unknown until PEXA becomes widely used by the profession. Lawyers should take every precaution in ensuring a smooth transaction for their clients. Electronic conveyancing has an elevated fraud risk in comparison to paper conveyancing. Both the Queensland and Western Australian jurisdictions intend to completely replace paper registration with the electronic system. The initial framework surrounding the system has sparked concern about security. The faults highlight why solicitors need to exercise every degree of caution to protect their clients and themselves. Authority to deal and the possibility of fraud PEXA requires solicitors who act for a vendor or purchaser to take “reasonable steps” in acquiring the true identity of the landowner or supposed owner. These reasonable steps can be scoped by the organisation and there are no mandatory provisions dictating the requirements for identity verification. Schedule 8 of the Model Participation Rules provides a standard but again there is no obligation to adhere to it. Identification forms can be both photographic and non-photographic. Yet with identity theft increasing, the possibility of a client presenting forged documents is a very real prospect. If a client purporting to be the registered proprietor of land presents a certificate of title and a forged passport, this may go unnoticed by a solicitor who is not qualified in the area of examining whether a document is deceitful or not. The face-to-face requirements are low, a subscriber is only required to meet in person with the client once at the beginning of representation. Interception of the transaction is then left wide open to fraudsters. The use of electronic signatures is also inadequate. The means of technology, whether it be the copying of online documents or manipulation of photographs, makes it easy for electronic signature abuse. In counteracting this, solicitors should aim to keep in constant contact with their client by phone and in person. This will assist in reducing any prospect of a fraudulent party imparting authority to a solicitor when they have no power to. Measures to counteract fraud It has been suggested that the implementation of biometric scanning devices would aid in eliminating fraud in electronic conveyancing. Countries, including Malaysia and India, have shown initiative in taking steps to roll out fingerprint scanning which would link the scan to an individual’s passport. Such initiative in passport linkage could be adapted by relevant Australian bodies to significantly reduce the possibility of fraud. For the system to effectively operate, measures need to be in place to protect the interests of registered and future proprietors. Although are they the only parties concerned in this security matter? Repercussions of PEXA’s protective framework Solicitors and their interests need to be protected. A failure in verifying the true identity of the supposed registered proprietor would likely result in a cause of action against the solicitor. It is well known that under a contract, a lawyer has a duty of care owing to the client which is actionable in both tort and through common law. The potential extent of claims that may arise will remain unknown until the system is widely used. Indefeasibility of title is of paramount importance to property law – any undermining of this principle by the system should be closely scrutinised and redeveloped. Professional insurance schemes that protect solicitors will be under intense pressure should the system fail to deliver adequate security. If the current framework remains in its loose form it may result in unprecedented costs for the industry. It would simply be careless to carry on with a system that does not yet have the protective measures in place that are essential for an effective operation. If such a system results in dire effects for clients and solicitors, then what does it really have to offer in comparison to paper conveyancing? As technology expands, the susceptibility of the system to hacking heightens. Measures need to be in place to circumvent hacking. The indispensability of land ownership is just too important to be shallowly protected. Where to next? To formulate a system that maintains consumer confidence and protects the core of the Torrens system of registration there must be stringent protections implemented. These must come in the form of innovative strategies which will eradicate the potential occurrence of fraud, false identity and the like. Current and future members of the legal profession should tread carefully in respect of the new technology. With an unremitting push towards firms turning into environmentally savvy, paperless houses, lawyers, business development teams and risk management teams should implement strong barriers to assist in the protection of client information. Verification steps should be rigorous and carefully surveyed by all employees who use the system. Without these crucial steps, consumer confidence in the profession diminishes. Young lawyers, as the future of the profession, should exercise a heightened level of awareness when using the system. Client contact is indispensable to any aspect of law practice. Communication with a client, whether it be physical or electronic, could mean the difference between a true transaction and one that is riddled with fraud. These interactions can and will allow for a lawyer to become conscious of any aspects of the deal which do not seem to fit in with the larger picture. Obtaining multiple opinions and oversight from peers, along with external opinions on a matter, will additionally highlight a lawyer’s proactivity in determining that a transaction is free of fraud. Bianca Pyers is a bachelor of law student at Victoria Law School.

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