New UK register to shed light on dodgy money flows, including through Malta

The true owners of foreign companies that have properties in the UK must now reveal themselves following the implementation of a new register launched on Monday, a move that could shed light on businesses that have dodgy money flow chains throughout numerous countries, including Malta.

‘The Register of Overseas Entities’ is part of a new economic crime law enacted in the UK in an effort to stop the flow of illicit Russian cash into London in the wake of the invasion of Ukraine.

The UK’s Business Ministry announced the launch of the register in a statement on Monday, pointing out it was created “to crack down on dirty money and corrupt elites in the UK”. 

The register, it said, is designed to “root out corrupt oligarchs and elites attempting to hide ill-gotten gains through UK property”. It will require anonymous foreign companies owning or seeking to buy UK land to reveal their true owners, “ensuring criminals cannot hide behind secretive chains of shell companies.”

This launch comes weeks after an inquiry initiated by the UK’s Foreign Affairs Committee seeking to better understand global flows of dirty money included an analysis calling out Malta as a jurisdiction ‘of particular concern’, highlighting its role as a “known destination for Russian funds”.

“We are particularly concerned, especially in light of the invasion of Ukraine by Russia, and the resultant sanctions by the UK, EU and US, about illicit flows of funds into Malta, as well as Malta’s track record on the protection of property rights, and investor protection,” the report stated.

It zeroes in on Malta’s relationship with the Russian Federation and cites three examples in which contracts funded by taxpayers were violated, leading to doubts about how well investors would be protected in a country where such contracts are not respected.

While, as of Monday, any foreign company wishing to buy UK property would have to identify its beneficial owner and present verified information before any application to the UK’s land registries can be made, those entities that already own land in the UK that is in scope will have a six-month transitional period to register their beneficial owners or managing officers.

It also applies retrospectively to property bought since January 1999 in England and Wales, and since December 2014 in Scotland.

The companies that do not comply with the new obligations could face criminal sanctions, including fines of up to £2,500 per day or a prison sentence of up to five years. Any overseas entity that has disposed of property since 28 February 2022 – when the legislation to create the register was first announced – will be required to provide a statement to Companies House.

The UK has itself been criticised for its role in providing a safe haven for Russian money, and the UK government is under pressure, resulting in the government announcing the Economic Crime (Transparency and Enforcement) Bill in February 2022.

                           

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6 Comments
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Marc Sant
Marc Sant
1 year ago

Window dressing. By placing a discretionary trust, set up in a non-UK jurisdiction as the shareholder of the UK property-owning company, the system is circumvented. In such cases the unrelated trustee is the legal owner of the shares and is indicated as the beneficial owner of such shares.

Many expert groups pointed this lacuna to the UK authorities who did nothing about it.

The UK, like Malta, fears the ensuing capital flight that would follow the introduction of an airtight-no loppholes register but wants to appear to be doing something about financial crime – hence this half-baked effort.

Robert
Robert
1 year ago
Reply to  Marc Sant

layering is the future

Nick Lindsay
1 year ago
Reply to  Marc Sant

Where there is a trust that owns the shares in the company, there does need to be full disclosure to Companies House of the beneficiaries, trustees and settlor/grantor. There is a loophole where the trust owns the land directly, but not in your situation.
It’s a complex area and the information also needs to be verified (a service we are carrying out)

Francis Said
Francis Said
1 year ago

Excellent procedure to prevent money laundering and organised crime. Well done England.

Francis Said
Francis Said
1 year ago

Oops nearly forgot. Any chance of our government (the best in the EU!!!) to enact a similar register?
I very much doubt it.

jingo
jingo
1 year ago

Russian funds, a problem but are the least of problems. What about the other dodgy funds? Who is going to bring them to the fore?

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