THE ELECTRONIC NOTARY



A Report by Michael Lightowler

[Council member of the Notaries' Society]



Introduction
It is time to review the progress that has been made and the progress that has not been made towards the development of the Cyber Notary in the UK. Back in 2000 we reported progress in terms that showed how frustrated we were at the slow progress of electronic commerce and the development of the role of the Notary. We said then:- The worldwide discussions about the principles had pretty much come to an end. It seems to be universally acknowledged that:-
(a) the use of electronic communications will advance rapidly in commerce;
(b) communications on the open internet cannot be regarded as secure;
(c) businessmen ought to want security;
(d) they do not yet appreciate the importance but rely on closed systems for large matters and take the risk for small ones;
(e) any system to provide extra security and open systems must consist of strong encryption within a public key infrastructure system (PKI) provided by trusted third parties;
(f) many governments still see such systems as a threat to security;
(g) governments and their organisations are beginning to use electronic communications for their own purposes in a number of different contexts.
Having got thus far things had begun to move more slowly than had been expected. Since then it has become clear that the Government are withdrawing from their active promotion of reliable electronic communication between citizens and the State although several departments are moving forward (notably the Land Registry) and others are trying. It has also become clear that PKI (which seemed to all of us then, and still seems to us as Notaries, to offer the only true security) may be too difficult and too expensive to adopt. It has appeared that business organisations are not yet ready to accept the risks they take in open communications on the Internet and those who are concerned about security are relying on closed systems (while taking inadequate precautions to control entry to those systems).
In May 2001 we produced a statement explaining the role and place of the Notary in electronic commerce. We set out our view that Notaries could and should be prepared to carry out their traditional functions for the authentication of transactions entirely electronically. We argued that Notaries were uniquely placed to provide reliable registration authority services to the providers of systems or of services. We warned then that there were obstacles:-

 “There are already a large number of major players in the field – mostly offering relatively low levels of certification at very modest prices. To offer higher standards at much higher fees will not necessarily appeal to a large market. The trick – which will be aligned between the commercial success and failure – will be to pitch a proper but not excessive level of security at a reasonable fee which is proportionate to the commercial sensitivity and importance of the documents being transmitted. Most Notaries are not at the front of electronic developments. Whilst most are now capable of using a PC for word processing and e-mails, they are most comfortable with the simplest of installations which they expect to operate without expensive software support. The need will be to find a platform for the transmission of encrypted electronic documents between participating Notaries which can be simply and cheaply installed on any PC and will seamlessly encrypt emails and identify the sender. Whilst it is hoped that there will, in due course, be electronic legalisation through the Foreign and Commonwealth Office, this will take a very long time as it will require amendments to the Hague Convention and their subsequent adoption by the different countries.”


Aims of the Report


The remainder of this Report attempts to do three things:-

Firstly we show that there are Notaries who are willing and able to deal with transactions in the electronic environment and that there is in place, as a result of the Pilot Project of Notaries for E-Commerce, a workable infrastructure (i.e. the technology) to achieve this.

Secondly we show that Notaries are willing and able to provide “registration authority services” to providers, to the public and to Government and public authorities, either through the tradition of personal appearance and verification of documents or information, or by the disciplined scrutiny of electronically certified identity and authority.

Thirdly we show how Notaries themselves can fulfil one of their most important duties, the keeping of their records, in an electronic form that will incorporate added security to the current procedures for the identification of individuals, the most immediate and important requirement in so many transactions. Notaries will be ready to meet the demand for their services when it comes, either because the Government once again takes seriously its own concerns about the reliability of the information it receives and upon which its governs, or because business concerns and individuals come to realise the risks they take in insecure communications can be avoided. It may be that a demand and a market place will only arise when there has been a significant disaster – we hope that they will arise because the public realise that Notaries have something useful to offer.

Part I – Notaries for E-Commerce Pilot Report Introduction


In November l999 Notaries for E-Commerce (NEC) was formed as a not-for-profit company for the sole purpose of undertaking an E-Commerce Pilot Project for Notaries and in order to receive funds by way of donations from Notaries to enable it to proceed with the pilot. The Project was independent but backed by the Notaries Society in England and Wales and also supported by the Society of Scrivener Notaries of London and by Notaries in the Channel Islands. Its activities were complimentary to those of Cyber Notaries UK. A contract was signed with technology service providers, Software Box Limited, for the managed installation and operation of a Baltimore uni-cert certification authority (CA) sited within a secure environment and using PKI technology. The managed CA service was designed to register Notaries, issue X.509 certificates, revoke certificates and cross certify with one other CA. NEC retained all procedural controls of the CA operation. Software Box provided dial in access to the CA service for a number of individual Notaries, selected from across the country, subject to the user systems being stand alone, installed with MS Windows and MS Outlook and having a specified minimum configuration of memory and disk space. Software Box also provided training and user support. The project was launched on 8 November 2002.



Management of the Project


It was recognised that project management would be difficult since the user population was widely dispersed across the Country and NEC had no central head quarters. It was decided that participating Notaries would need to be able to commit time to project work on Wednesdays and also be able to access technical support within their own law firms. The project relied heavily upon individual Notaries taking up their own ideas with members of the Project team as appropriate and building up discussion groups via email. Several ad hoc meetings were held, also three steering group meetings and two teleconferences and there has been a good deal of contact between Directors of NEC and the Project Manager. At the time of training, Notaries were registered and issued with digital signatures, which were then held in store on the site server to be requested via email when needed. At the same time, Notaries equipment was commissioned and installed with the Software Box application interface software enabling Notaries to enter on screen relevant client information, together with their own recording of the event being notarised and the digital signatures of both appearers (i.e. clients) and Notaries who would complete the Notarial Act. Initial Project work took the form of Notaries practising a simple application, namely the witnessing of an Oath of Allegiance. This was to acquire hands on knowledge of, and experience in, the use of the computer and to test the procedures put in place to support the effective operation of the CA. The problems identified each week would govern the following week’s activity. A user guide was produced in hard copy for each Notary and also published on the NEC website. The Notaries initially worked in pairs in role play mode sending digitally signed documents to each other acting as relying parties. In effect, each Notary would “invent” a client, satisfy himself in the normal way regarding his true identity and then electronically request Software Box to provide a digital signature certificate for that appearer. This would be granted and acknowledged by email. The Notary would then follow screen prompts allowing him to key in the information required. This initially pertained to the Oath of Allegiance, but later covered the range of work carried out by Notaries for clients. The Notary would then nominally request the appearer to press the button, effectively adding the appearer’s encoded signature to the document. The Notary’s next action would be to key in whatever comments were required to complete the Notarial act and then add his own digital signature and seal. The document was then emailed in encoded form to the Software Box secure site and the appearer’s certificate revoked, since it will have been issued for a one time transaction only.



Initial Outcome of the Pilot


Early findings showed the following:-

• Notaries are well capable of conducting Notarial business electronically and there is widespread interest in taking forward the notion of developing a secure electronic Notarial service for the future.

• There is considerable lack of understanding outside the Notarial profession about the function of the Notary and this ignorance in industry has contributed to the absence in the market place of fit for purpose products needed to be integrated into an electronic Notarial service specification without risk to the acknowledged integrity of the profession.

• The delays and difficulties met as a direct result of under-resourcing and under- funding the pilot have meant that the pilot objectives, specifically those concerning the development of the underlying procedural infrastructures and protocols needed to support successful CA implementation, have not been able to be met within the planned timescale. Throughout the project close attention was given to the relevant activity ongoing in the UK and Europe regarding the setting of standards and legislation covering electronic signatures and qualified certificates. The NEC Chairman sat on the Board of tScheme, which is the Government supported industry led, self regulatory enterprise engaged in setting approval criteria for trust services and emerging as the preferred alternative to Part I of the Electronic Communications Act 2000.

Membership of the E-Centre Legal Group and other bodies have kept NEC abreast of activities in the area of law enforcement and human rights which also have implications for the take up of E-Commerce. Awareness of wider global activity comes to NEC from its association with Cyber Notaries UK. NEC has also had extensive meetings with commercial organisations willing to engage the UK Notarial profession in “live” electronic Notarial business and has also promoted the profession through the office of the E-envoy.


Principal Conclusions


If we are to draw any conclusions from the Project, the main one must be that the technology does exist to enable Notaries to conduct their business utilising the Internet in a secure and efficient way and that such technology is developing in a manner which will ensure that business conducted electronically can be made to be as secure and reliable as is necessary to meet the needs of the parties to the relevant transaction. The technology exists now to enable Notaries in England and Wales, using as a base the systems developed by NEC, to be able to engage in electronic commerce at a reasonable cost.

The installation of software and the availability of secure servers mean that the Notary’s ability (subject to the normal identification checks) to prepare, authenticate and dispatch to foreign jurisdictions private and commercial documents of the kind dealt with by Notaries on a day to day basis is something available now and can be installed with relative ease. Our research and the contacts we have made mean that Notaries can be enabled (with suitable preparation and training) to begin providing an electronic service as soon as it is wanted (see paragraph 3 below “Specific Projects”).

Where documents require legalisation, either the system of legalisation will need to change (perhaps enabling duly registered Notaries to have the ability to prove their own credentials?) or the offices which deal with legalisation or consularisation will themselves need to embrace electronic commerce. The issue for all those in the profession who wish to participate in electronic commerce is whether there is a definable market for the provision of electronic Notarial services.

Many Notaries today rely upon the Internet and electronic means of communication to go about their daily business but the final product of their service is invariably a hard copy of a (non-electronic) document bearing original (non-digital) signatures made with pen and ink and legalised in a hard copy form by the Foreign and Commonwealth Office and/or the relevant Embassy or Consulate which is dispatched overseas by mail or courier. The Notarial profession is proceeding at different speeds across the world to embrace electronic commerce. The speed of progress towards Notarial E-Commerce is limited not only by the cost and availability of relevant technology but also by the varying desires of Notaries in each country to adopt E-Commerce, the legislation of the relevant jurisdictions, the resources available to Notaries and the demands of the clients whom the profession serves. There is little doubt that the methods of working within the profession will eventually move at an increasing pace towards the wider adoption of E-Commerce. The most rapid progress has been made in those countries whose Notaries are officials appointed by the State and where the legislation introducing electronic commerce is matched by the availability of resources. Given that at present there are no proposals under UK domestic law to appoint Notaries to positions of State Officials as is the case in many civil law countries - the move towards electronic commerce will have to come either from changes in legislation requiring transactions to be conducted electronically, or by the initiative of Notaries to force a change in the way that Notarial Acts are performed (which in itself has limitations) or by a general movement towards the adoption of E-Commerce in the execution and transmission of documents which is likely to take some years yet to evolve. In the UK the greatest progress made to date in the field of E-Commerce (so far as the legal profession is concerned) is in electronic conveyancing where significant public resources have been made available to the Land Registry and the legal profession must invest in new relevant technology if it wishes to continue to practice in that field.



Part II – Development of Electronic Commerce for Notaries


If the adoption of electronic commerce by Notaries is to be determined solely by the needs of those whom it serves (i.e. demand led), progress towards achieving such a state is likely to take some years and to be adopted only by those members of the profession who are or who become electronically literate and whose clients demand such service. Some Notaries feel that the provision of such a service (irrespective of demand) is a preparation for what will certainly occur in due course and may be likely to promote among his own clients a desire to increase their use of and reliance upon electronic transactions. Otherwise progress will only be realised in response to a need to embrace electronic commerce in order to stay in business (cf. electronic conveyancing) or if Notaries successfully promote themselves to a position where new services which it offers, either to the State or its citizens, are taken up and can only be conducted electronically. As E-Commerce becomes the norm rather than the exception, digital signatures and electronic encryption and transmission of documents take the place of current practice, Notarial intervention will become increasingly difficult unless the profession has moved itself to a position where Notarial intervention in electronic form can be seen to be more efficient and less expensive than current methods. If Notaries do not embrace E-Commerce in all its aspects and actively seek new roles, business opportunities will be lost and the profession will be in danger of limiting itself to paper transactions which have a built in obsolescence.

During the course of the last two years there have been a number of suggestions made as to areas where Notaries could usefully provide additional services and do so electronically. These are principally although not exclusively in areas where Notarial skills of identification and authentication may be seen as a way of reducing fraud. Examples of these are:-

(a) At present it is envisaged by the Land Registry that applications for dealings in registered land will be submitted electronically by Solicitors, Notaries, Licensed Conveyancers and other authorised persons who have Service Agreements in place to access the Land Registry’s electronic network. However, the Land Registry are obliged to provide access to citizens who wish to do their own conveyancing. Private Conveyancers accessing the network who have not been subjected to the scrutiny of a Solicitor in terms of identification and money laundering checks could expose the conveyancing system to possible fraud. This seems an ideal situation for a Notary to provide an interface between the Land Registry and the private applicant to ensure checks on identity and proper authentication are carried out.

(b) The Financial Services Authority is extending its supervisory involvement to an increasingly wide area of commerce including banks, financial services intermediaries and now insurance companies and brokers. Applications for licenses to conduct business are becomingly increasingly complex and the production of photocopied passports, driving licences and utility accounts are becoming common place. A single endorsement by a Notary on a relevant application form where the necessary identity checks have been made could speed up the process and make the identification process more reliable.

(c) Some Notaries have identified problems which may exist in relation to fraudulent applications for grants of probate and letters of administration. There are many such applications made by private individuals but it is considered that the scope for fraudulent activity could be considerable because insufficient checks are made into the identity and capacity of those making the applications and into the genuineness of the Wills and other documents which are offered as evidence of the applicant’s right to be appointed. Checks of the kind customarily made by Notaries in their course of their work could help reduce the incidence of such fraud by ensuring that all such applications are endorsed by a Notary prior to submission to the Probate Registry.



Part III – Enjoa


Notaries in England and Wales are required by the rules of their profession to keep proper records of all their Notarial Acts. The manner in which such records are kept and their quality may vary considerably between Notaries. Proper record keeping is an essential part of good practice and the introduction of a system which would ensure that records are kept in a secure, legible and consistent format would enhance the practice of Notaries. The National Notary Association in the United States (“NNA”) has developed a suite of software which can record Notarial Acts on a PC or laptop with ease, efficiency and security. It ensures that correct entries are made providing all the necessary information which needs to be recorded. The software is capable of capturing a signer’s or witnesse’s thumb print and signature and of taking a picture of the appearer using a digital web camera. As a safeguard it is possible to save back-ups of the electronic register. The NNA has been approached to enable trials of the product to take place in England and Wales. If successful the software could be adjusted to cater for the necessary changes which will be needed to conform to UK practice and terminology and its use eventually licensed for distribution to UK Notaries. The use of any system which provides a uniform method of recording Notarial acts in a reliable and secure way must be encouraged. As many members of the Notaries Society will know, a demonstration of ENJOA (Electronic Notaries Journal of Official Acts) was given in September 2004 at the Society’s AGM in Bury St Edmunds. This demonstration underlined the ease with which Notarial Acts could be recorded in a safe and consistent manner including the capture of thumb and finger prints and signature. Members of the Society will now be asked to indicate the level of interest which might exist to see if it is worth approaching the NNA to supply suitably “anglicised” versions of the software for use in England and Wales.


3. Specific Projects


In the course of NEC’s many encounters and meetings held in various parts of the country in the last four years, it has made contact with a number of commercial organisations who have developed software of the kind which could be adapted for use in Notarial E-Commerce and who either have or have access to the installations necessary to conduct and manage secure transactions and to issue classes of digital certificates which may be relied upon in a wide range of commercial transactions.

NEC has been offered assistance by these three organisations to develop secure systems for Notaries and contact is being maintained; however no further action has been taken. The opportunity to explore these relationships further and to provide Notaries with the ability to offer true electronic services does exist but will require an investment of time and resources to proceed to the next stage. Realistically this could not be achieved by as small a group as has operated through NEC to date.

Since the NEC Project started, there has been a good deal of progress made in understanding what is required to provide electronic services; the cost of creating and managing such a service has reduced as technology has advanced and become more easily available. If Notaries who are interested in developing a state of the art system in the UK come forward in sufficient numbers, there is no reason why good progress cannot be made. However the extent to which Notaries could use such technology in a way which is more profitable to them than with current practices, would only become evident over time. It would mean that those who did invest in such a project would be best placed to exploit E-Commerce when it becomes a necessary part of everyday life as surely it will. A necessary part of making further progress will be to produce a technical specification on which such a system can be built.


4. Thanks


The completion of the Pilot Project and the writing of this Report would not have been possible without the generous contributions which have been made by many individual Notaries throughout England and Wales and the Channel Islands as well as the support of Baltimore Technologies and of various professional organisations including The Notaries Society and The Society of Scrivener Notaries. These financial contributions and the dedication of a number of individuals who together have contributed literally thousands of hours in attending meetings with Government and commercial organisations, investigating a wide range of proposals of possible interest to Notaries in the field of electronic commerce, have resulted not only in raising the profile of Notaries but in gaining a vast amount of knowledge and experience which will assist the profession in developing its future involvement in E-Commerce in whatever form it chooses to do that.


5. Closing Comments


A principal lesson to be learned is that if further progress is to be made, it will require a concerted effort by a larger group of Notaries interested in promoting electronic commerce and the future of the profession to build relationships with the companies who have offered their help and to pursue some of the ideas canvassed in this Report. Resources will also be needed. If third party funding is to be sought, any commercial project is only likely to attract sufficient funds where there is a sound business plan produced as a basis for the Project. Unless purely investigatory (which is unlikely to attract sufficient funding) such a Project would necessarily require at least the suggestion of a return on investment which could only be met from a market place willing to purchase electronic services from Notaries. In a country where Notarial intervention is generally speaking limited to documents for use overseas, any estimates of a return on capital to potential investors are likely to be speculative. Development of new opportunities for Notaries to perform authentification/certification services within the UK would be likely to benefit the profession as a whole. We will therefore continue to explore with the Government other possible ways of achieving this. If successful, the ability to be able to deliver such services electronically is likely to enhance rather than diminish the possibility of broadening the range of Notarial services within the UK. The NEC project has shown there are many UK Notaries who are ready to take a full part in contributing towards the building of a trustworthy environment for the conduct of global business via the Internet. The Project has proved that participation by Notaries in the field of electronic commerce is technically possible and the relevant legislation and technology are in place. All that is now required is to harness the enthusiasm and resources of a sufficiently wide group of Notaries to make electronic services available and for there to be a market ready willing and able to accept them.




Michael Lightowler Notary Public

November 2004
E-mail : ml@notaryservices.co.uk