Verification of identity rules a headache for lenders 10 February 2015 4:24PM John Kavanagh One aspect of Australia's property conveyancing industry that seems immune from the move to electronic commerce is the verification of identity.The rule-making body for the sector, the Australian Registrars' National E-Conveyancing Council, has issued model rules governing the way lenders, brokers and legal practitioners must verify the identity of people involved in a property transaction.According to ARNECC, the "safe harbour" procedure is that a lender or broker must physically witness "any registry instrument" at the time that identity verification is carried out.In the case of mortgage sales, the registry instrument would be the mortgage document signed by the mortgagor.ARNECC wants to align the paper-based conveyancing system and the new electronic system, so the rule would apply in both situations.Gadens Lawyers partner Jon Denovan said there was no requirement to follow safe harbour procedures and lenders can use other ways to identify mortgagors. However, most lenders prefer to comply with safe harbour procedures.Denovan said the conveyancing industry was struggling to move past face to face verification and adopt the sort of procedures used for complying with anti-money laundering rules. Part of the reason the conveyancing industry is slow to change is that state governments are liable to pay compensation in cases of fraudulent property transactions and want ARNECC to adopt a conservative approach.Denovan said ARNECC's latest ruling would create additional headaches. "It is common practice for lenders to conduct verification of identity procedures early in the loan process, normally at the application stage," he said."The proposed procedure will mean that, in order to meet safe harbour, mortgagees will also need to conduct verification at the time the mortgage is signed," Denovan said."This will result in an unnecessary duplication of processes, and is likely to add significant expense and frustration."