With the increase in cybercrime and fraud in recent years, verifying a client’s identity has never been more important.
While you’re probably aware of it’s importance, are you aware of the VOI risks involved and how to manage them?
In Australia there is a formalised process of Verification of Identity (VOI). These requirements are in place in an attempt to prevent fraud in property transactions.
If your firm is unprotected to fraud, the implications can include financial loss, reputational damage, regulatory penalties and legal action.
There are multiple risks when it comes to not identifying your clients, that is why procedures need to be put in place to avoid them.
In this article we discuss two outcomes from not identifying your clients and the three levels of protection against the risks.
Client’s identity can lead to fraud
Identity fraud involves someone using another individual’s personal information without consent, often to obtain a benefit. Identity fraud is a serious issue in Australia with the ACCC reporting this year already, over $4 Million lost over 8,000 reports.
One of type of fraud that is commonly used against law firms is ‘advance fee fraud’ whereby a fake law firm refers a fake client with a fake matter to a real law practice.
The scammer arranges for the law practice to receive and accept a fake cheque into a trust account and then pressures the conveyancing practice to release some or all of the funds before the fraud is discovered.
This leaves your law firm at a loss along with all the problems that a deficiency entails.
Obtaining a client’s name and address is not sufficient ‘identification’ to combat identity fraud and meet client ID requirements.
Damage to your reputation
If the authorities carry out an investigation for non-compliance or diligence due to fraud, your firms reputation can be damaged.
All stakeholders in your business will most likely start to reconsider their position with you and you will likely lose clients.
Nobody will want to do business with a company which doesn’t follow correct or safe procedures.
To prevent any risks associated with not identifying your client you should take these three steps.
- (ID) Bare identification
This is where you obtain an individuals personal information, including their ID, passport or Birth certificate. This is fulfilling the question of “Who do you say you are?”
- (VOI) Verification of identity
Verification of identity is when you collect 100 points of identity from an individual and then verify what they have provided by seeing them, either face-to-face or through video chat.
This can be done by VOI solutions, like triVOI. This fulfills the question of “Am I satisfied that you are who you say you are?”
- (KYC) ‘Know your client’
Knowing your client’s identity involves screening for any risk factors that may affect the matter. This can include things like the individuals occupation, financial situation and residency status.
This fulfills the question of “Even if you are who you say you are, am I satisfied you are an acceptable risk?”.
It’s important to verify the people you are transacting with. By implementing safe processes into your firm and making sure all members are following them, the risks of experiencing fraudulent behaviour is a lot less likely.
triSearch is also hosting a webinar where ex-conveyancer and now triSearch account manager, Viv Pauling, will be taking attendees through a short summary of the ARNECC rules regarding the verification of identity, as well as how you can digitally verify your clients using triVOI. Register here.
You can also Contact Us via the website for any questions you might have.