UK register of foreign property-owning companies to go live in three years
The British government has confirmed that its planned beneficial ownership register of foreign companies that own or buy UK property will go live in early 2021.
Draft legislation is to be published this summer by the Department for Business, Energy & Industrial Strategy (BIS).
The ostensive purpose of the register is to ‘crack down on criminal gangs laundering dirty money in the UK’ by buying high-value property, typically in central London. It is not, of course, known how much UK property has been bought with foreign criminal proceeds, but BIS claims that GBP180 million of UK property was brought under criminal investigation as the suspected proceeds of corruption between 2004 and 2014. More than 75 per cent of properties currently under investigation use offshore corporate secrecy to hide their ultimate beneficial owners’ identities, it says.
Currently, when a non-UK company registers its legal ownership of land in England and Wales, the Land Register shows only the name of the company and its territory of incorporation. All companies must also provide their beneficial ownership information to their legal representatives during a property or land purchase, as part of the due diligence process. However, this can be circumvented by not using legal representatives. Moreover, says BIS, lawyers handling the transaction may not be stringent enough in their verification – and even where full information is provided, it is not made public.
The new regime will force a foreign company planning a UK property investment to submit beneficial ownership information in a form that is easily accessible to law enforcement organisations. It would then be allocated a unique identification number, which it would have to provide to the Land Registry when registering a purchase of land or real property in England and Wales, as domestic UK companies already are required to do.
The register will be the first of its kind in the world, said Business Secretary Greg Clark. ‘It will build on [the UK’s] reputation for corporate transparency as well as helping to create a hostile environment for economic crimes like money laundering…It will also provide the government with greater transparency on overseas companies seeking public contracts.’
According to law firm Dentons, the consultation held last year on the proposals indicate that those who do not comply with disclosure requirements will not only face criminal sanctions, but also lose the ability to sell the property, and will risk the creation of a long lease or legal charge over it.