4 April 2025
Chasing Synthetic Shadows – An Overview of Deepfakes and its Potential Impacts on Verifying a Mortgagor’s Identity
Written By: Craig Reynolds
Artificial intelligence (“AI”) has quickly become a part of our everyday life, with its quick adoption by individuals and companies. In November 2024, McKinsey & Company reported that in just 10 months, the number of respondent organisations that reported they use generative AI regularly almost doubled to 65% of the total respondents.[1]
But with new technology brings new challenges, in particular the emerging risk of deepfake-driven fraud, particularly as practitioners and organisations are increasingly using digital methods to verify the identities of individuals.
What is a deepfake?
Deepfakes, or synthetic media, are realistic fake videos, images and/or sound recordings designed to imitate another person’s appearance and/or voice.[2]
Although manipulation of this kind to media is not new, the rapid development of AI has enabled deepfakes to be utilised in real time, unlike earlier technologies that altered media after it was created.[3]
But could this technology be used to emulate the identity of a person over a live audio-visual call? Conventional wisdom would suggest no. However, given that leading AI developers predict AI capabilities are doubling every six months, this position may be misguided.[4]
Current position in Australia
Presently, there is little to no formal acknowledgement of deepfakes in statue or common law regarding commercial matters.
It appears that the only codified formal definition relates to the non-consensual transmission of sexual material, defining a deepfake as “includes images, videos or audio depicting a person that have been edited or entirely created using digital technology (including artificial intelligence), generating a realistic but false depiction of the person”.[5]
In September 2024, the Australian Government proposed mandatory guidelines relating to AI and its regulation acknowledging that the “current regulatory system [of Australia] is not fit for purpose to respond to the distinct risks that AI poses”.[6]
These guidelines appear to aim to establish legislation governing the development and use of AI by professionals, rather than focusing on fraudulent use of this technology by individuals.
Despite this lack of codification, the open definition of reasonable steps when it comes to verifying the identity of a signatory for a mortgagor is likely to capture deepfakes.
Identifying the mortgagor
All Australian States and Territories have adopted standards for verifying the identity of a signatory for a mortgagor.[7] These standards generally require the mortgagee or its agent (such as a legal practitioner) to take reasonable steps to verify the identity of the signatory for the mortgagor at the time the mortgage for land (“mortgage”) is being executed.
In most jurisdictions, failure to take reasonable steps can lead to the Registrar voiding a mortgage or denying the mortgagee indefeasibility.[8]
At a minimum, the mortgagee or its agent at the time of the mortgage being executed generally must:
- Review and certify as a true copy 100 points of identification (for example a current passport and driver licence) of the person signing the mortgage on behalf of the mortgagor;
- Compare the likeness of the photo in the identification to the signatory;
- Ensure the details between the identification documents are identical and any discrepancies to be addressed prior to execution;
- Ensure the signatory has authority to sign the mortgage for the mortgagor; and
- Conduct all relevant searches, such as an ASIC search when the mortgagor is a company.
The above only serves as a guide. What constitutes ‘reasonable steps’ will be determined on a case-by-case basis, having regard to the specific circumstances and facts, including the relationship between the parties, the mortgagee’s knowledge, and any unusual transaction features.[9]
The open definition of reasonable steps therefore should provide pause when considering rapidly developing technology surrounding deepfakes and how it may impact what is deemed reasonable when using digital methods to identify the mortgagor’s signatory.
Does this mean that using digital means to identify people and execute a mortgage should not be utilised? The short answer is no, but these means should be used with care.
A case for digital means
Although this article may seem to imply that digital methods for mortgagor signatory identification and execution pose excessive risks compared to in-person meetings and wet-ink signatures, this is not accurate.
Digital means provide numerous additional tools to ensure the signatory is who they say they are, such as:
- The Australian Government Document Verification Service to verify that the details of the identification match what is recorded by the Australian Government;
- AI assisted photo recognition in real time;
- Liveness check of the person being identified;
- Two-factor authentication codes for a signatory to access and sign documents digitally; and
- Recording of the location of the signatory at the time they executed the documents.
What is key is to ensure that a platform used for a signatory for a mortgagor is safe, secure and prevents the use of third party software. Taking such steps minimises the risk of a person fraudulently executing a mortgage and/or contravening the requirement to take reasonable steps to verify the identity of a signatory for a mortgagor.
Caution is also necessary when electronically executing mortgages or witnessing mortgagor signatures, as not all jurisdictions permit these methods as well as utilising certain digital means could result in a breach of privacy laws. However, commentary relating to these issues are outside of the scope of this article.
Conclusion
Digital means to verify the identity of a signatory for a mortgagor is being adopted rapidly, as it enables quick and convenient verification of a person at any time or place.
However, the separation digital means creates, provides an opportunity for fraudulent actors to utilise AI to impersonate the person being identified.
It follows that a prudent verifier utilising digital means to verify the identity of a signatory must undertake their own research to ensure that they are satisfied as to the integrity of the verification platform and that utilising such platform is taking reasonable steps in their jurisdiction.
Regrettably, no specific law currently addresses deepfakes in mortgage impersonation cases, leaving it to the verifier to ensure they have taken reasonable steps to prevent deepfake impersonation of authorised mortgage signatories.
Given the risks and potential loss from an invalid mortgage, when in doubt, it seems that best practice would be to verify the mortgagor signatory’s identity via an in-person meeting.
Please contact the team at JHK Legal if you have any questions in relation to this Artificial intelligence and its impacts on verifying a Mortgagor’s identity, we would be happy to assist.
[1] ‘The state of AI: How organizations are rewiring to capture value’ McKinsey & Company (Web Page, 3 April 2025) https://www.mckinsey.com/capabilities/quantumblack/our-insights/the-state-of-ai
[2] eSafety Commissioner, Deepfake trends and challenges — position statement (Statement published, 23 January 2022)
[3] Ibid
[4] Satya Nadella, ‘Full Keynote: Satya Nadella at Microsoft Ignite 2024’ 00:04:28 – 00:05:48 <https://youtu.be/3YiB2OvK6sY?si=bVexUBgQNxF1Uq7z>
[5] Criminal Code Act 1995 (Cth) s 474.17A (2) (b)
[6] Australian Government Department of Industry, Science and Resources Proposals Paper for Introducing Mandatory Guardrails for AI in High-Risk Settings (Proposal paper, September 2024)
[7] Transfer of Land Act 1958 (Vic) ss 87A (1)-(2), 87B (1)-(2), Real Property Act 1900 (NSW) s 56C (1), (2), Land Title Act 1994 (Qld) ss 11A, 11B, Land Titles Act 1925 (ACT) ss 48BA, 48BB, Land Title Act 2000 (NT) ss 78A, 81A, Real Property Act 1886 (SA) s128A, Land Titles Act 1980 (Tas) s 160A (2) and Recorders Directions Version 1.0 7 March 2024, Transfer of Land Act 1893 (WA) 81K and Customer Information Bulletin dated 24 May 2017
[8] Transfer of Land Act 1958 (Vic) ss 87A (3), 87B (3), Real Property Act 1900 (NSW) s 56C (6), Land Title Act 1994 (Qld) s 185, Land Titles Act 1925 (ACT) s 165, Land Title Act 2000 (NT) s 85A, Real Property Act 1886 (SA) s128A (i)
[9] C & F Nominees Mortgage Securities Ltd v Karbotli [2021] VSCA 134 [96]