Remote online notarization – where a notarization can be conducted using audio/video technology – presents businesses, including banks and other financial services providers, with the opportunity to further digitally transform their consumer experience, leading to greater efficiencies, consumer convenience, and ultimately greater consumer satisfaction. But before businesses either enable their own notaries to act as remote notaries or accept remote online notarizations completed by outside notaries, they must proactively work to mitigate the risks associated with moving from accepting in-person paper (or electronic) notarizations to accepting notarizations conducted where the notary and the signer are in separate locations.
This article provides an explanation of a remote electronic notarization (“RON”) process, followed by an overview of the legal framework supporting RON. Next, this article addresses the core concepts of remote online notarization laws enacted to date. Finally, this article identifies certain risks that businesses should evaluate before utilizing a RON process.
What is RON?
RON for businesses typically works as follows: (i) the business entity uploads documents to be signed and notarized; (ii) the RON platform receives the documents and sends notice to the signer; (iii) the signer receives the notice and accesses the website; (iv) once at the website, the signer begins the authentication process; (v) the notary receives notice that the signer has accessed the website and joins the signer for a two-way audio/video session that is recorded and completes the authentication process; (vi) the signer signs the documents and the notary electronically notarizes the documents (all while each party can see and hear each other through the two-way audio/video session); (vii) copies of the executed documents are returned to the business entity and signer; and (viii) copies of the audio/video recording of the authentication process and other authentication data is deposited in the notary’s electronic journal along with information about the signer and the notarized documents.
The legal framework supporting electronic notarization, has been generally composed of a variety of federal and state laws, including the “full faith and credit” clause of the U.S. Constitution, the federal ESIGN Act, the Uniform Electronic Transactions Act (adopted by 47 states and the District of Columbia), other specific statutes adopted in some states that authorize electronic notarization (either generally or in specific circumstances), and laws in most states recognizing the validity of notarial acts performed under, and in compliance with, the law of another state. Taken together, these laws establish two rules that should be effective in most states: (i) they authorize notaries to electronically notarize electronic records signed in the presence of the notary, and (ii) they recognize that a notarial act performed in compliance with the laws of one state will be recognized as valid in another state, even if the notarial act does not comply with the laws of the second state.
With the general legal validity of electronic notarization firmly established, and laws in place recognizing the validity of notarial acts performed in compliance with the laws of other jurisdictions, certain states began adopting laws expressly allowing—and thus expressly regulating— RON. Virginia was at the forefront of this movement, adopting a statute authorizing RON in 2012. As of early May 2019, twenty-one states have passed and/or enacted RON laws—the twenty-one states are Arizona, Florida (pending governor’s signature), Idaho, Indiana, Iowa, Kentucky, Maryland (awaiting governor’s signature), Michigan, Minnesota, Montana (which revised its law in March 2019 to align with the current approach adopted in the other states), Nevada, North Dakota, Ohio, Oklahoma (pending governor’s signature), South Dakota, Tennessee, Texas, Utah, Vermont, Virginia, and Washington—and more have initiated legislation this year.
Most states that have since adopted a RON law have incorporated the following key principles first established by Virginia, such as: (i) establishing what constitutes “personal appearance,” for purposes of RON, (ii) how to reliably establish the signer’s identity, (iii) the location of the parties, and (iv) record keeping.
For signer appearance before the notary using two-way audio/video communication, the states adopting RON laws create a legal equivalence between (i) a physical and in-person appearance and (ii) appearance by means of the audio/video communication. Relatedly, to prove the signer’s identity, states have adopted methods to authenticate the signer. Typically, unless the notary or a credible witness has personal knowledge of the signer’s identity, these authentication methods include a credential analysis (e.g., validating the person’s driver’s license is authentic) and a dynamic knowledge-based authentication (“KBA”) test (e.g., set of questions generated from a third-party database). Some states have more detailed authentication requirements that must be met, and these requirements may differ across jurisdictions.
With respect to location, the notary must be present in the state he or she is commissioned in when performing the remote online notarization, but for the most part, the signer’s location does not matter (for some states, if a signer is located outside the United States, the transaction must have a nexus to the United States). Notaries must also keep a journal from the remote electronic notarization and a back-up copy of the recording (though the information required for the journal, length of time needed for keeping the backup, and the specific requirements for maintaining the journal and the recording vary by state).
Finally, because RON’s are electronic records, to establish their validity and to have evidentiary value, both ESIGN and UETA require that the record be created such that the record cannot be altered after signing and notarization without detection (e.g., applying a tamper-evident seal).
As more states enact RON laws, more customers will expect their banks and other businesses to allow documents to be notarized remotely. Before businesses make this change—either by allowing their notaries to perform RONs or by accepting such notarizations performed outside their ecosystem—they must evaluate the risks involved. As noted above, a key challenge is knowing the requirements for each state (which may differ) and ensuring that these requirements are met, including requirements addressing notary registration, allowable technology, the notarial seal, and the notary’s journal and audio/video retention.
Further, if a business’ notaries will perform the services, the business will need to address how it provides retention copies of the signed and notarized documents to the signer and how it stores copies of the recorded sessions for its notaries. And because RON requires an audio/video feed, the business will need to address privacy implications, especially where unexpected parties may appear on screen (e.g., a spouse who hasn’t provided consent to be filmed and recorded). In addition, businesses will need to address allocation of liability between the parties, including the notary, the platform, and the third-party identity providers (e.g., the third-party incorrectly authenticates a fraudulent signer). While there is much to consider when moving to RON, overall, RON presents businesses with an opportunity to further digitally transform their business and provide their customers with the flexibility and efficiency that technology brings to the table.