Transparency International UK warns ministers they need to act fast to close a major loophole in new laws intended to stop kleptocrats and oligarchs stashing their ill-gotten gains in UK property.
The government’s flagship anti-corruption legislation, the Economic Crime and Corporate Transparency Bill, today enters Report Stage in the House of Lords, but requires amendment to make property ownership via complex trust structures more transparent. Investigations regularly find opaque trusts used to obscure ownership of high-end real estate in the UK.
Duncan Hames, Director of Policy for Transparency International UK says:
“While we welcome many of the changes already made to this important Bill, the failure to improve transparency over trusts controlling UK property is unfinished business. This is a significant loophole used by kleptocrats and oligarchs to hide their property portfolios in the UK. If this law is to work as intended and shine a light on suspect cash in our economy, then compliance professionals and the public need transparency around these trust structures.
“Our analysis of the new Register of Overseas Entities shows trusts are being used to hide who ultimately owns 7,000 offshore companies controlling over 20,000 properties. Despite new transparency laws, substantial amounts of high-end real estate remain anonymously owned across the UK. Given the speed at which the original Bill was rushed through Parliament it is understandable there are wrinkles to iron-out, but if sanctions are to be made to stick this needs to happen sooner rather than later.”
Notes to editors:
Currently, changes introduced by the Economic Crime (Enforcement and Transparency) Act 2022 require offshore companies to report the details of any trust arrangement controlling them to Companies House; however, this information is then withheld from public view. This creates a loophole by which it is easy for those seeking to sidestep public scrutiny by setting-up a trust arrangement to control their offshore holding company. A small amendment to the Act would enable this information to be made public, which would bring transparency of these trust arrangements on a par with existing information about beneficial owners who are natural persons.
The government’s response to this problem is an amendment to the Bill that would provide the Secretary of State the power to introduce a system whereby information about trusts in the Register of Overseas Entities may be disclosed upon request, but this alone does not go far enough. At a minimum, the government should commit to using this power to introduce a transparent system that will enable large scale investigations by journalists and civil society to help uncover potential wrongdoing and help bring an end the UK’s role in international money laundering.