Safe Harbour, we hear this quite a lot in conveyancing teams, but what does it actually mean and it is a mandatory requirement?

There have been so many cases over the years of fraudsters selling peoples houses from under them and then running off with the money. With case law such as Dreamvar, Lawyers are pretty scared of getting it wrong. But this is where applying the Safe Harbour Standard can really help a lawyer out. The Safe Harbour Standard, when done properly, will protect conveyancing lawyers if they inadvertently end up dealing with a fraudulent transfer.

For those who aren't familiar with the specifics of the case of Dreamvar, it centred around the accountability of solicitors in instances of identity fraud.

Here's what happened: A fraudster impersonated the seller of a property in London valued at around £1 million and managed to sell it to an unsuspecting buyer named Dreamvar. After the sale, both the fraudulent seller and the proceeds vanished into thin air.

Dreamvar subsequently took legal action against their solicitor, alleging negligence (in both contract and tort) and breach of trust. They also sued the solicitor representing the fraudster seller, citing negligence, breach of warranty, and breach of trust.

Initially, the High Court ruled that only Dreamvar's solicitor could be held liable and dismissed all claims against the solicitors representing the fraudster. Many found this decision somewhat severe, considering the solicitors acting for the fraudster hadn't taken adequate measures to verify their client's identity as required by the Money Laundering, Terrorist Financing, and Transfer of Funds (Information on the Payer) Regulations 2017.

The case eventually made its way to the Court of Appeal. There, the judge determined that the solicitors representing the fraudulent property vendor should also shoulder some responsibility alongside those representing the deceived buyer for any incurred losses. As a result, the Court of Appeal mandated both firms to make financial contributions.

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What is the Safe Harbour Standard?

In March 2021 HM Land Registry (Land Registry) issued “Practice guide 81: encouraging the use of digital technology in identity verification” which is also known as the “Safe Harbour” Standard.

The Safe Harbour standard is based on the principles outlined in the Government's Good Practice Guide (GPG45). It includes checking identities using biometrics and cryptography.

Safe Harbour also intends to verify that the person signing, either individually or on behalf of a company, is the rightful owner of the property or legitimately involved in the transaction that needs to be registered.

The guidance sets out 4 requirements that must be met in order for the checks to meet the  Safe Harbour Standard. 1-3 apply to all conveyancers, requirement 4 applies to conveyancers acting for the seller.

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Requirement 1 - Obtain evidence

You need to make sure the person you are acting for is who they say they are.

The documents required to meet this requirement are:

• Biometric passports that meet the International Civil Aviation Organisation (ICAO) specifications for e-passports
• Identity cards from an EU or EEA (European Economic Area) country that follow the Council Regulation (EC) No 2252/2004 standards and contain biometric information
• UK biometric residence permits

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Requirement 2 - Check the evidence

You must then check that the evidence provided is not a fake and is still in date.

This should be done by using an identity check provider to verify for you that the documentary and cryptographic security features of the evidence are genuine.

Checking the evidence is genuine by just using a photograph of the document or checking the Machine Readable Zone code will not meet the requirement.

The identity check provider’s system must read the chip within the evidence using NFC by providing any required cryptographic keys and then:

• check the digital signature is correct for the organisation that issued the evidence
• check the signing key belongs to the organisation and has not been revoked
• extract the biometric information needed for requirement 3

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Requirement 3 - Match the evidence to the identity

You must check that the person who has provided the evidence matches the photo in the evidence.

This must be done by using an identity check provider. They will compare the biometric data collected from a 'liveness check' to the biometric data stored in the chip of the evidence you have received.

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Requirement 4 - Obtain evidence to make sure the person who owns the property is the same person you are acting for (only needs to be met is you are acting for the sale/borrower/lessee)

You need to check that the individual has a connection to the property by obtaining 2 pieces of evidence to prove proof of address. Online statements are acceptable as long as they have been downloaded and it is not a screenshot. Screenshots of online statements will not be accepted.

Acceptable forms of evidence are:

• utility bills, bank or building society statements dated within the last 3 months
• local authority council tax bills for the current financial year
• original mortgage statements from a recognised lender for the last full year
• current UK or EEA photocard driving licences
• HM Revenue and Customs (HMRC) self-assessment letters or tax demands dated within the current financial year
• an insurance policy schedule for the property
• a current firearm or shotgun certificate
• credit cards bearing the Mastercard or Visa logo, an American Express or Diners Club card, or a debit or multi-function card bearing the Maestro or Visa logo which was issued in the United Kingdom and is supported by an account statement less than 3 months old
• a copy of the agreement for purchase of the property
• a lettings agent agreement on headed paper
• a local authority building regulations sign off for works undertaken to the property addressed to the individual
• management company service charge demands for the property addressed to the individual
• confirmation of tenancy deposit scheme registration

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Why use Safe Harbour?

The aim is for the Safe Harbour Standard  to not only be a protection for conveyancers but also a way to help you feel more comfortable using technology as part of the process. Technology can help lower fraud risk and costs, and make a more streamlined process for both conveyancers and their clients.

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Safe Harbour Misconceptions

Safe Harbour is compulsory for all property transactions

It is not compulsory, the Land Registry will not stop firms from using other methods to identify and verify their clients. However, the bonus with Safe Harbour is that added protection from any claim against the firm if it were to act for a bad actor and unwittingly help facilitate property fraud.

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Safe Harbour is the same as NFC ‍

NFC is only one requirement of the standard. NFC identity checks verify for you that the documentary and cryptographic security features of the evidence are genuine. This is why there are limits on the type of evidence that can be checked, mainly passports, EU identity cards or UK biometric residence permits. However it does give you the best level of confidence as to the reliability of the check.

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If we use the Safe Harbour Standard then there are no risks of Money Laundering.

This is completely separate to the Money Laundering Regulations (MLR) requirements, however they do overlap and this would be a good process to follow as part of the identification and verification of your client under the MLR.

It is unlikely that all clients will be able to meet the Safe Harbour Standard requirements as it requires specific ID documents to be provided. Not everyone will have a passport, EU identity card or UK biometric residence permit. So it is important that you have processes in place that work best for the firm and your clients.

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