For Notaries who must adhere to the federal government’s “Red Flags Rules” on identity theft prevention, flexibility is the watchword. That’s because the rules, which are designed to prevent identity theft and will be enforced as of August 1, do not give specific instructions. Instead, they issued a set of general guidelines designed to help organizations covered by the rules set up a program to detect and react to threats of ID theft.
The rules broadly apply to financial institutions and creditors, such as banks and mortgage brokers. The creditor category also includes any entity that extends credit to clients or accepts delayed payment for services, such as doctors and attorneys. While most Notaries are not directly covered by the Red Flags rules, many may be indirectly affected by them. In fact, Notaries’ traditional role in deterring fraud will likely be crucial for successful compliance.
There are four basic steps to complying with the rules: 1) identify relevant red flags; 2) detect red flags; 3) prevent and mitigate identity theft; and 4) update the program periodically. Organizations are directed to draw on their experience and knowledge about identity theft to develop the program. The rules also require programs to spell out how they will be administered.
Two of the warning signs, or red flags, that a program is likely to address fall right into Notaries’ field of expertise: detecting suspicious documents and suspicious personal identifying information. Detection, however, is not enough. The program also must be designed to mitigate or prevent identity theft. Again, that is where Notaries may be asked to play a role and, in fact, may find themselves written into Red Flag programs.
Though there are no criminal penalties for noncompliance, violations of the rules could be subject to stiff civil monetary penalties. More information on the Red Flags Rules guidelines can be accessed on the Federal Trade Commission’s (FTC) Web site at www.ftc.gov/redflagsrule by clicking “Read The Guide.” If you or your organization has additional questions about compliance, contact the FTC at RedFlags@ftc.gov.