The British government plans to create a publicly accessible register of the foreign entities that own UK property, and of the individuals who actually control them, to improve transparency over ownership but has rejected calls to explicitly include trusts in its scope.
The joint committee on the draft Registration of Overseas Entities Bill report raises a number of concerns about the draft legislation, particularly criticising the omission of trusts from the proposed rules.
The Bill does not cover trusts, and since trusts are not technically ‘entities', there are concerns that they will be used to circumvent this law. It recommends that the government's plan to ensure that trusts are transparent, to be reinforced under the upcoming fifth EU Anti-Money Laundering Directive, must therefore be introduced at the same time as this draft Bill.
The risk of criminals exploiting UK trusts to launder money is assessed to be low"
The Bill's sponsoring department, the Department for Business, Energy and Industrial Strategy (BEIS), has now rejected this criticism.
"Any overseas entity holding land on behalf of a trust will be required to register with Companies House, even though the trust itself will not", BEIS stated in its official response to the parliamentary committee. It noted that the 2017 National Risk Assessment of Money Laundering and Terrorist Financing concluded that "the risk of criminals exploiting UK trusts to launder money is assessed to be low".
Moreover, it says the draft Bill's definitions of 'overseas entity' and 'legal entity' are wide enough to catch all relevant structures, and clear enough for foreign entities themselves to understand.
More than £90bn is estimated to be laundered illegally through the UK each year, according to the all-party parliamentary committee scrutinising the registration of overseas entities bill.
In 2017, 160 properties worth over £4bn 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 jurisdictions where secrecy was paramount.
Witnesses told the committee that a lack of information about anonymous owners often stands in the way of criminal investigations, underlining the need for new regulation.
Several of the committee's other suggestions are also being overlooked, including the 25% control threshold set by the Bill's definition of beneficial ownership. The thresholds will, however, be "kept under review".