Notary Conflict of Interest

Article: Conflict of Interest  
ASN Hot Tip, November 2008-#1

The Situation:  A notary has been asked to perform a notarial act involving a document that the notary must also sign as a party to the transaction. The signer’s execution (signing) of the document requires an acknowledgment, but the notary’s, as a named party, does not.

The Notary’s Dilemma:  Can the notary proceed with notarization involving a document that he will also sign as a named party?

The Solution:  The above situation would create a conflict of interest for the notary and he should not perform the requested notarial act.

Notary laws provide certain prohibitions against conflicts of interest. The purpose of these laws is to protect the public. In performing your duties, it is essential that you act with total impartiality. You must be an unbiased, disinterested party who stands between the signer and anyone who would defraud that signer. That means, when performing a notarial act, you cannot have any conflict of interest, including being a party to the transaction or gaining financially or materially from the transaction.

NAMED PARTY CONFLICT
Oregon notary law, for example, specifically forbids notaries from performing notarial acts involving a transaction to which the notary is a party:

Oregon Revised Statutes 194.158 Prohibited acts:
(1) A notary public may not perform a notarial act if the notary is a signer of or named in the document that is to be notarized. Michigan’s notary statutes carry a similar prohibition:

Michigan Notary Public Act, Section 55.291:
(7) A notary public shall not perform any notarial act in connection with a transaction if the notary public has a conflict of interest. As used in this subsection, “conflict of interest” means either or both of the following:
(a) The notary public has a direct financial or beneficial interest, other than the notary public fee, in the transaction.
(b) The notary public is named, individually, as a grantor, grantee, mortgagor, mortgagee, trustor, trustee, beneficiary, vendor, vendee, lessor, or lessee or as a party in some other capacity to the transaction.

FINANCIAL GAIN CONFLICT
Clearly, you cannot be impartial if you stand to gain financially from a transaction, even if you are neither a party to nor named in the documents related to the transaction. For example, if you receive a commission or bonus if the transaction is successfully executed, you are not an impartial observer and must not be the notary for the transaction. (A financial benefit would not include your fee for the notarial service, nor would it include your salary as an employee.)

MATERIAL GAIN CONFLICT
When deciding whether or not you should perform a notarial act, it is sometimes harder to envision a benefit that is not expressed in dollars and cents.

An ASN member who was a notary for a church called to ask if she could notarize for her pastor on documents establishing a school at the church. As it happened, with the establishment of the school the notary would gain the use of an automobile that would be purchased by the school. We told her that the use of the automobile constituted a material gain and meant that she should not be the notary for documents related to the establishment of the school because she would not be considered impartial.

NOTARIZING FOR FAMILY
Another conflict of interest is notarizing for family members. Some states’ notary laws do not specifically address notarizing for relatives, while other states have very specific statutes that prohibit the notary from officiating for certain family members (usually spouse, children, siblings and parents). A notary public must be an impartial witness, and best practice would dictate that the notary not notarize for a person related by birth, marriage or adoption.

 Questions, comments on this Hot Tip?  support@asnnotary.org

Article: Notary Basics: Recognizing Conflict of Interest
American Notary, Issue 2007-#5

"Notary Alice” has a small but steady practice as an income tax return preparer. A number of Alice’s clients happen to be foreign nationals (non-resident aliens).

You may be aware that foreign nationals who earn income in the United States are required to report that income to the IRS, just as United States citizens must do. The problem is, these folks typically do not have a Social Security number to identify themselves with the IRS. Instead, they must obtain an IRS Individual Taxpayer Identification Number, using the IRS Form W-7.

One way the IRS allows these applicants to substantiate the personal information they provide on the W-7 is to attach a “notarized or certified copy of a valid passport.” Meaning, the applicant may obtain an attested photocopy of their (validated) passport from a notary whose state permits this notarial act as an authorized duty.

Back to Alice…. one of her foreign-national clients, for whom she had prepared a tax return, asked if Alice would also make an attested photocopy of his passport in order to apply for a taxpayer ID number. Initially Alice said yes, then remembered that her tax preparer fee includes a percentage of any amount that would be refunded to the taxpayer. So, Alice asked us, would conflict of interest prohibit her from making the attested photocopy of the taxpayer’s passport?

We believe there WOULD be a conflict, and applauded Alice’s careful consideration of notary law. In order to file a complete tax return, the taxpayer must also apply for and obtain a taxpayer ID number. Alice’s notarization over the W-7 application form would enable this to happen, which in turn enables the submission of the tax return. Alice stands to gain from the completed transaction, since her tax preparer fee is based on a percentage of the taxpayer’s refund. Thus, Alice would not be completely impartial when performing the notarial act of making an attested photocopy of the taxpayer’s passport.

Our Advice: simply find another notary to make the attested photocopy, and avoid any hint or question of a conflict!

Questions, comments on this Hot Tip?  support@asnnotary.org

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