The UK government has published the draft text of the Economic Crime (Transparency and Enforcement) Bill 2022, which will compel foreign entities that acquire property in England, Scotland and Wales to register and declare their beneficial ownership. It says implementation will proceed 'at pace' following royal assent.
The ostensible aim of the Bill is ‘to crack down on foreign criminals using UK property to launder money’, although the government says the reason for its immediate introduction is the Ukraine crisis.
The measures will apply to any company or similar legal entity that is governed by the law of a country or territory outside the UK and to individuals who have significant influence or control over the entity. Significant influence or control is defined as 25 per cent or more of the shares or voting rights. An overseas entity that owns or plans to buy land in the UK will be required to identify its beneficial owners and to register them with Companies House. Once registered, the overseas entity will be given an ID number, enabling it to register its title to land. Information supplied to the register will have to be verified and updated annually until the entity is eligible to be removed from the register.
The Secretary of State for Business, Energy and Industrial Strategy, Kwasi Kwarteng, said the Register of Overseas Entities was a 'key element of our strategy to tackle dirty money from Russia and elsewhere'. He said Companies House has already received GBP20 million this financial year and a further GBP63 million for future transformation of its operations, including delivering this new register.
'Oligarchs and kleptocrats from Russia and elsewhere have used the veneer of legitimacy provided by UK registered companies and partnerships, and have used high-end property to help launder proceeds of corruption', said Kwarteng. 'At present, Companies House has very limited powers to prevent that abuse…By legislating now, we will send a clear warning to those who have used, or who are thinking about using, the UK property market to launder ill-gotten gains'.
Kwarteng indicated that 'it may take a few months to get the register up and running', and suggested that it will eventually, if not immediately, be open for public inspection, after negotiation with other jurisdictions. The initial draft legislation includes provisions for the dates of birth and residential addresses of individual beneficial owners to be restricted from public view. It also gives powers to the Secretary of State to make further restrictions.
As well as the register of overseas entities, there will be further Companies House reforms transforming it into a 'custodian of accurate and detailed information', said Kwarteng. All entities registered at Companies House will have to have at least one fully verified natural person directly associated with them on the public register. 'Anyone setting up, running, owning or controlling a company in the UK will need to verify their identity with Companies House, which will then be able to challenge dubious information and inform the security agencies.'