Landmark transparency reforms become law but still more to do warn transparency campaigners

  • Statement from Transparency International UK for Immediate Release (26 October)
  • For more information or interviews contact Jon Narcross, Senior UK Media and Communications Manager (07794728820)

New laws to improve information about the true owners of UK companies are a major step forward in the fight against corruption - but swift steps should be taken to close remaining loopholes, Transparency International UK said today

Changes made by the Economic Crime and Corporate Transparency Bill, which concluded its passage through Parliament last night, will make it harder for criminals and corrupt individuals to abuse UK companies to hide the proceeds of their crimes.

This adds to the reforms in the Economic Crime (Transparency and Enforcement) Act 2022, emergency legislation laid in the wake of Russia’s full-scale invasion of Ukraine, which set out to bring transparency to foreign ownership of UK property. The new law strengthens the existing regime by:

  • Empowering Companies House to verify the identities of the owners of UK companies
  • Making it harder for kleptocrats to silence journalists through ‘SLAPP’suits
  • Introducing a new ‘failure to prevent’ offence for corporates that commit fraud.

However, gaps remain which leave UK companies vulnerable to abuse:

  • Trusts: The corrupt and other criminals can continue to withhold their ownership of UK property assets from public view by owning overseas companies, that in turn own UK property, through opaque trusts. 
  • Shareholders: Information about the shareholders of UK-registered companies is difficult to access, extremely limited, incomplete and unverified.

Duncan Hames, Director of Policy at Transparency International UK, said:

“We’re delighted to see these landmark reforms complete their passage through Parliament. It should not have taken the invasion of Ukraine to finally bring this bill forward, but its implementation should significantly strengthen Britain’s defences against fraud and money laundering, clamping down on those who abuse our economy for their own private gain.

"We are grateful to MPs in all parties who have championed the call for transparency, and to the government officials who diligently developed this legislation behind the scenes. In particular, we recognise the dedication to this work of Dame Margaret Hodge MP, Lord Agnew of Oulton, and the Company Law & Governance team at the Department for Business and Trade.

“But there is still more to do - while formal parliamentary scrutiny of this bill is now complete, the government has committed to consulting on how to use new powers to expose those hiding their assets behind opaque trusts. It should consult, and make these trusts more transparent, at the earliest opportunity to ensure the criminals and the corrupt have nowhere to hide.”

ENDS

NOTE TO EDITORS

Recommendations:

  • Trusts: The corrupt and other criminals can continue to withhold their ownership of UK property assets from public view by owning overseas companies, that in turn own UK property, through opaque trusts. We calculate this hides ownership of over 7,000 companies  – almost a quarter of those currently registered - and more than 20,000 properties from public view. During the passage of the Economic Crime and Corporate Transparency Bill, the government committed to launching a consultation on how to increase transparency over trusts in the Register of Overseas Entities by the end of this year; however, it is not clear what system will be put in place, or when. Transparency International UK calls on the government to swiftly consult and implement a new system for transparency over trusts in the Register of Overseas Entities, ensuring journalists and civil society can have access to this information in the register, not limited to individual requests.
  • Shareholders: Information about the shareholders of UK-registered companies is difficult to access, extremely limited, incomplete and unverified. While a new requirement in the Bill for private limited companies to record full names for shareholders in their registration (information companies must already collect), as well as a requirement for certain companies to provide a one-off full shareholder list, are a step in the right direction, shareholder data will continue to be of a worse standard than other information on the register without further reform. The Bill gives the government the power to improve information about shareholders of UK companies; it should use this to require companies to provide shareholders’ address, month and year of birth, nationality or country of incorporation (for legal entities), and nominee status. It should also consider the circumstances under which this information should be verified, such as when shareholders own 5% or more in company shares.