The sad events in Ukraine have forced the government and the property industry to pay even more attention to where client money comes from and who their client is. This has had serious implications for the whole industry, not just for those exposed to foreign property transactions.
Events in Ukraine forced the government to push through the Economic Crime (Transparency and Enforcement Bill), which will create a register upon which all foreign owners of UK properties must declare their true beneficial ownership and verify their identity with Companies House. More seriously, those who do not declare their beneficial owner will be subject to restrictions on the sale of property and may face up to five years in prison.
On top of this, in the government’s March 2022 response to their digital identity and attributes consultation, July 2021, Julia Lopez MP, Minister of State for Media, Data and Digital Infrastructure, details their “intent to legislate….to enable the development of a secure and trusted marketplace for digital identities and attributes across the UK economy”.
How is the legal sector responding?
The property industry has been working to improve identity verification standards as technology has improved and digital means of identity verification have proved to be more secure and safer than the “traditional” methods of matching a person’s face with their passport.
On Thursday, the LawtechUK Regulatory Response Unit published a joint statement in support of digital identity technology in the legal sector. The intention is to help better tackle the many misunderstandings faced around digital identity. LawTechUK are working with the rest of the industry to help encourage legal practitioners to adopt these improved and safer means of identity verification, making it safer for the industry and consumers.
The Department for Digital, Culture, Media and Sport (DCMS) introduced the Digital Identity & Attributes Trust Framework, as well as proposing new legislation. Beneath this is the development of industry-specific trust schemes such as MyIdentity, designed specifically for the home buying and selling sector. MyIdentity has been supported right across the sector from the likes of the CLC and Propertymark as well as getting into the FCA sandbox test environment.
One of the key outcomes of the DCMS Framework is the certification of identity service providers (IDSPs) and a trustmark. Furthermore, those IDSPs who are working to the MyIdentity scheme standards will now carry liability for their activities and have the ability to join Cifas, the UK’s main fraud prevention service.
Digital identity technology has vastly improved. Adopted and used in the right way, it will reduce the risks associated with property and identity fraud. The reduction in ID fraud risks will have potential cost savings on Professional Indemnity Insurance if firms use a digital identity scheme for transactions.
Industry needs to move forward together and embrace these standards, otherwise it will be left to the controls of external players. In the United States, Apple have been developing a digital identity scheme and Microsoft have been working on their own scheme for years, as have Google and Facebook.
Fragmentation and different standards bring greater risk to the industry.
Never has the industry been required to get behind a standards-based approach to identity verification than now, with government and industry support, certification of IDSPs and introducing greater safety into the sales process.
This will help better protect the industry as well as consumers.