£4bn of UK property is owned by ‘high risk individuals!’ Lords Committee eyes money laundering

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Workers marching against bankers following the 2008 banking crash

FOUR BILLION pounds of UK property is owned by high-risk individuals.

The House of Lords Joint Committee is looking at the market and money laundering.

The draft Registration of Overseas Entities Bill is urgently needed, but its loopholes must be addressed.

The Joint Committee on the Draft Registration of Overseas Entities Bill has today published its pre-legislative scrutiny report.

The Committee welcomes the Bill, but calls for its concerns to be rectified to ensure that the legislation successfully deters money laundering in the UK property market.

The UK is valued for its democratic political environment, its independent legal system, and its rigid financial protections.

While these attributes have made the property market popular for legitimate investors, it also appeals to money launderers who use property to conceal or clean illicit funds.

Between 2004 and 2015 £180million of UK property was subject to criminal investigation as suspected proceeds of corruption, and this may be just the tip of the iceberg.

In 2017 160 properties worth over £4 billion were identified as being purchased by high corruption-risk individuals, and 86,000 properties in England and Wales have been identified as owned by companies incorporated in secrecy jurisdictions.

The Committee’s witnesses suggested that a lack of information about anonymous owners, often stands in the way of criminal investigations.

It has been more than three years since the government pledged to introduce a transparent register of the foreign entities that own UK property, and of the individuals who actually control them.

Time is of the essence and regardless of the effect of Brexit on the parliamentary timetable, this legislation is needed now.

The Serious Fraud Office has recently pledged to speed up investigations into fraud and corruption, and with an effective Register of Overseas Entities there is now a real chance to add another tool to the UK’s anti-money laundering toolbox.

The Joint Committee has five key concerns:

1) Trusts – The Bill does not cover trusts. Since trusts are not technically ‘entities’, there are concerns that they will be used to circumvent this law. The government’s plan to ensure that trusts are transparent – the Fifth EU Anti-Money Laundering Directive – must therefore be introduced at the same time as this draft Bill.

2) Exemptions – The Bill allows the government to exempt certain entities from publishing their information, and in some cases from disclosing it at all. The government should make clear in the legislation exactly which entities can be exempted. And to be as transparent as possible, the government should publish in an annual statement to parliament the number of times these exemptions are used.

3) Updating – Out-of-date information will mean the Register is not fit for purpose. Vendors of property should update their ownership information once a year, but also update information about proposed transactions before they take place – capturing information at the point where most money laundering occurs.

4) Accuracy – The current proposals lack verification checks to deter individuals, including criminals, who want to submit false information. Without such checks the draft Bill risks failing to achieve its primary aim of increasing transparency about who really owns land.

5) Enforcement – Enforcing this new law may be difficult. The report therefore suggests that civil penalties will be easier than criminal sanctions to enforce abroad, and against land or other assets in the UK.

Chairman of the Joint Committee on the Draft Registration of Overseas Entities Bill Lord Edward Faulks QC, said: ‘We welcome this much-needed legislation as one of the vital tools required to create a hostile environment for money launderers who want to use the UK property market to hide unlawful funds. The legislation is well drafted, but there are still some loopholes in the draft Bill which, if unaddressed, could jeopardise the effectiveness of this important piece of legislation.

In the current political climate, anti-money laundering may not seem an immediate priority. But the evidence we took shows there’s a huge problem, and it’s not going away. Time is of the essence: The government must get on with improving this Bill and making it law.

In response to the publication of the report by the Joint Committee on the Draft Registration of Overseas Entities Bill, Ava Lee, Senior Campaigner at Global Witness, said:

‘This Bill has the potential to be groundbreaking. For the first time we could find out who really owns this country.

‘Today’s report makes it clear that there is ambition across the political spectrum to bring real transparency to the property market.

‘Now the government needs to step up to the task and show it has learnt the lessons from the companies register, so this one is fit for purpose from the get go.

‘And then we might finally be able to say that the UK is no longer rolling out the red carpet to the criminal and corrupt.’