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December 2011 |
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MacGillivrays |
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NSW New Identification Requirements for Mortgagees |
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The New South Wales’ Real Property Amendment Regulation 2011 is now law. The regulation details the identification steps the Government requires mortgagees to take to confirm the identity of mortgagors. In our bulletins, April 2010 and December 2010, we commented on the proposals relating to this law.
The significant changes between these regulations and the earlier proposals are:
< the provision for lenders to rely on certified copies of identification documents; < the recognition that a lender need not personally interview the mortgagee; and < the provision of an alternative identification route, being compliance with the Anti-Money Laundering and Counter-Terrorism Financing Rules (AML/CTF Rules).
The AML/CTF Rules
The provision deems a lender to have satisfied the identification requirements if the lender
“has complied with the Anti-Money Laundering and Counter-Terrorism Financing Rules under the Anti-Money Laundering and Counter-Terrorism Financing Act 2006 of the Commonwealth in relation to the mortgage.” [my emphasis]
“in relation to the mortgage” may have more significance than it first appears. The AML/CTF rules have no provisions in them relating to mortgages. AML/CTF does not deal with identification of mortgagors, it deals with the identification of parties to financial transactions. It would be unconstitutional for the Federal Government to pass AML/CTF Rules relating to identification of mortgagors of land in a State.
Most of the time a lender will automatically identify the person signing a mortgage under their AML/CTF rules because the person is the borrower or a director of the borrower (e.g. a company loan). The provision above applies to this class of person so a lenders normal AML/CTF procedures should satisfy the requirements.
Guarantors and Attorneys
However there are a small number of people who sign mortgages and who a lender may not be required by AML/CTF to identify. These are:
< guarantors who the lender has no obligation to identify under AML/CFT because there is no relevant relationship; and < some attorneys under a power of attorney in a similar position.
We sought clarification from the draftsman of the new regulation and were advised that the draftsman had not contemplated mainstream lenders taking mortgages from guarantors. This means that it is uncertain whether the provision will apply in circumstances where the guarantor has no relevant relationship with the lender.
Until the law is clarified in relation to these people we recommend that lenders should use the identification procedures in the regulations to identify them.
Certified Documents
The other significant change from the draft versions of the regulations is the provision allowing a lender to rely on certified copies of documents.
This change also has its limitations. It allows a lender to rely upon “a copy of a document ... certified as a true copy of the original only by a person authorised to take and receive statutory declarations under section 21 of the Oaths Act 1900.” [my emphasis] This means the following people.
“Registrar-General, a Deputy Registrar-General or any justice of the peace, notary public, commissioner of the court for taking affidavits, Australian legal practitioner …, or other person by law authorised to administer an oath,”
Please note, with the exception of an Australian Legal Practitioner, notary public or other person authorised by law to administer an oath, the people mentioned in the section are appointed under NSW law. Their counterparts outside NSW have no power to certify these documents unless the laws of the relevant State give that power.
For example, Bank Managers, Pharmacists, and Registered Conveyancers can not certify documents for the purpose of these provisions. In Queensland only Judges and Australian Legal Practitioners (Solicitors, Barristers and notaries public) can certify these documents for the purpose of the NSW regulations.
What do you need to do now?
Unless you intend to personally identify each borrower and guarantor, using the method described in our December 2010 bulletin, Lenders will need to rely on either their AML/CTF identification procedures, or certified documentary evidence (usually being a copy of a drive’s licence or passport).
AML/CTF
If you chose the AML/CTF route, you should revise your AML/CTF procedures for identifying parties to your transaction documents so that they are consistent with the requirements of the AML/CTF Rules, particularly with regard to Rule 4.
Certified Copies of Documents
If you are going to rely upon certified documentary evidence for identification of mortgagors, implement procedures to make sure that the documents are certified by the appropriate people. The KISS approach (keep it simple …) is to make sure that certified documents are only certified by Australian Legal Practitioners.
Document retention
You will also need to implement procedures to ensure that you keep evidence of the relevant identification and all documents relating to it for at least seven (7) years after the mortgage is registered. If registration is delayed for any reason, this could be much longer than 7 years after you close your file. It may be prudent to file the relevant paperwork with the securities for the loan to ensure that this requirement is observed.
We are happy to assist you with your compliance requirements. Please contact our Banking Services Team on 1300 369 581 or gordonp@macgillivrays.com.au
Article by Gordon Perkins, Associate Banking Services, MacGillivrays Solicitors
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Buying a property? Talk to one of our conveyancing professionals today 1300 369 581 or markt@macgillivrays.com.au.
PLEASE NOTE: This article is not legal advice and our comments are of a general nature only. This document is not to be relied on as substitution for proper detailed legal advice. Liability limited by a scheme approved under professional standards legislation.
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