1 March 2022 - Ground-breaking legislation introduced to Parliament could provide a major boost to Britain’s defences against illicit wealth but gaps in the current bill offer those with money to hide ways to continue to conceal their ownership of property, Transparency International UK said today.

The Economic Crime (Transparency and Enforcement) Bill introduces much-needed reforms on property ownership transparency, strengthening UK asset recovery powers, and on sanctions.

Transparency International UK has been collating information on questionable funds from around the world being invested in UK property since 2016. This figure now stands at £6.7 billion. Of this total, £1.5 billion worth of property was bought by Russians accused of corruption or links to the Kremlin. £830million worth of this total is owned via offshore companies.

Part 1 of the Bill introduces transparency over the true owners of overseas companies that own property by requiring these companies to declare their beneficial ownership information. It also requires existing owners in England and Wales to report beneficial ownership information on properties bought before January 1999 and existing owners in Scotland who have bought property since 2014.

But there are some gaps within the new law. Below is Transparency International UK’s analysis on the property transparency section of the Bill (Part 1 – Register of Overseas Entities).

Rachel Davies, Head of Advocacy at Transparency International UK, said:

“We welcome the introduction of this ground-breaking legislation that we have been campaigning for since 2015. Transparency over who really owns property here is vital to addressing Britain’s role as a global hub for dirty money from Russia and elsewhere. To ensure these new measures are as effective as they can be, we urge the government to close the loopholes that would provide those with money to hide ways to continue to conceal their ownership of UK property.”

The good

• The Bill ensures that once the register has been implemented fully, a property cannot be sold unless its proprietor has submitted its beneficial ownership information.
• It will be an offence to deliver misleading, false or deceptive material to the registrar or deliver false, misleading, deceptive statement. This comes with potential imprisonment for the maximum summary term for either-way offences, or a fine, and could be a strong deterrent if properly enforced.
• The definition of who constitutes a beneficial owner is the same as the existing requirement for UK companies, which is a broadly sufficient definition.

The bad

• An 18-month commencement/transition period is far too long and risks massive levels of asset flight. We recommend that the Government implement transitional provisions to stop property from being sold before the register comes into force and the proceeds transferred overseas.
• The current draft would leave the door open to companies that hold UK property claiming they have no beneficial owner. This is already a common problem with the UK’s company register.
• We know 1,892 property titles were last purchased by overseas companies before January 1999, but these would be exempt from having to declare their owners under the current drafting. We recommend that all overseas companies that own UK property are required to declare their beneficial ownership information. 
• There is no clear scope on how verification of data will work. We strongly recommend that the Government bring forward promised legislation at the earliest opportunity to empower Companies House with the powers to introduce verification checks and to query, investigate and remove false information.