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Watch out, secret companies – the EU is cracking down on dirty money

Written by Alice McCool on Tuesday, 19 May 2015

While the EU takes important steps towards tackling money laundering and tracing the proceeds of corruption, we look at what the UK could do to strengthen itself against similar risks.

Two pieces of news broke earlier today:

1. The EU has agreed to new rules aimed at preventing money laundering in the European Union.

2. New data released by our friends at the TI Secretariat has found that four out of five EU citizens are in favour of companies being required to reveal who the real owners are. Only one in four believe their government is effective in preventing dirty money being spent in their country. 

It’s fantastic that the EU has made this step towards tackling money laundering particularly concerning the proceeds of corruption. Money laundering is happening on our doorsteps and its consequences are more far reaching than most of us imagine – from those in poorer countries without access to basic services, to those affected by human trafficking. Carl Dolan TI-EU Director said:

“There is a clear public interest in stopping the flows of illegal money that is put at $70 billion in the EU alone. The EU, and European Parliament in particular, should be congratulated on passing new legislation that is a welcome first step in unmasking the corrupt in Europe.

 “A number of EU governments say they will establish a publicly accessible register for company ownership. That is what the public want. Making this information fully public would provide instant access for those investigating corrupt money trails in and outside the EU”.

From a personal perspective, I’m particularly delighted to see that EU citizens have shown the issue of secret companies matters to them. Many of us working on this topic spend half our time trying to de-mystify the complicated concepts and language around ‘money laundering’ and ‘beneficial ownership’, with mixed results. That’s why it’s so great to hear 84% of UK respondents ‘strongly agree’ that our government should require companies to publish the real names of all their shareholders and owners.

Luckily, British legislation on this came into force at the end of March. Under our new law, UK-registered companies must submit information on their true owners (such as full name and nationality) to Companies House.

But…and there is most definitely a but. While UK companies must be transparent about who really owns them, there is a gaping hole in the UK’s armour against money laundering.

This hole is the financial secrecy of the UK’s Overseas Territories and Crown Dependencies (OTs and CDs). You might have noticed our campaign to end corrupt money in UK property lurking around the internet over the past few months. We found that before purchasing property overseas companies (such as those registered in OTs and CDs) are not required to register the same details that UK companies are.

This is problematic because the UK’s connections with secrecy havens like the British Virgin Islands (BVI) are one reason why Britain is so alluring for the corrupt — our research shows 75% of UK properties under investigation for corruption are registered with offshore companies. With the exception of Jersey which does have a central register, in the OTs and CDs details about company shareholders are not collected, making it near impossible to discover who hides behind them.

We know offshore havens are the favoured vehicle for secrecy by corrupt individuals laundering their money in the UK. We have also found that nearly 90% of foreign company-registered properties in London are located in offshore havens. But because the true owners are hidden, nobody knows how many have been bought with the proceeds of corruption. But the risks are high. Saadi Gadaffi bought his Hampstead mansion with £10m of Libyan state money via a BVI company called Capitana Seas Ltd. How many other cases like this exist? Revolutions shouldn’t have to happen before we find out.

All it requires is a technical fix. We’re asking that before completing a purchase on a property, overseas companies should be required to submit to the Land Registry the same details that UK-registered companies must submit to Companies House. Join our call today.

Sign the petition here.
View a visualisation of the problem here.​


Read 1640 times Last modified on Wednesday, 11 November 2015 10:07

Alice McCool

Alice formerly worked for Transparency International UK as our Campaigns Officer. You can tweet her via @McCoolingtons.

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