UK government to progress Register of Overseas Entities
The measures, to be included in the Economic Crime (Transparency and Enforcement) Bill, were first suggested in 2016 and a public consultation on a draft Bill was held in July 2018. However, the draft legislation attracted much criticism, both from those who wanted rigorous safeguards to protect legitimate confidentiality and from others who considered that the measures did not go far enough. Consultations also had to be held with the British Overseas Territories. Due to these issues and also the lack of parliamentary time caused by Brexit and COVID-19, the measures have not yet been tabled. As recently as 31 January 2022, industry minister Lord Callanan was unable to give a timetable for their introduction.
The flurry of sanctions triggered by the Russia-Ukraine conflict now appears to have precipitated matters and the government has now announced that the legislation will be introduced in parliament this week.
Various amendments have been made to the draft legislation in accordance with the public response to the consultation. Owners who do not comply with the registration requirement will have restrictions placed on the deeds to make it more difficult to sell the property and those who provide false information could be jailed for up to five years. The law will apply retrospectively to property bought by overseas owners up to 20 years ago in England and Wales and since December 2014 in Scotland.
The government says that the register 'will require anonymous foreign owners of UK property to reveal their real identities to ensure criminals cannot hide behind secretive chains of shell companies, setting a new global standard for transparency.' Failure to declare beneficial ownership will result in entities facing restrictions over selling their property and a possible prison term of up to five years.
The new Bill will also increase the National Crime Agency's (NCA’s) powers to seek unexplained wealth orders (UWOs) through civil enforcement action. Law enforcement agencies will be given more time to review material provided in response to a UWO. They will also have statutory protection from the substantial legal costs that can result from bringing an unsuccessful UWO application: a factor that is said to have deterred applications for orders. Moreover, those who hold property in the UK in a trust will be brought within scope and the definition of an asset’s ‘holder’ will also be expanded. The government says this will 'ensure individuals can’t hide behind opaque shell companies and foundations.'
The government is also preparing a second economic crime Bill that will increase the powers of Companies House to make applicants prove their identity when setting up companies. A consultation paper setting out these proposals is in preparation.
Secretary of State for Foreign, Commonwealth and Development Affairs Liz Truss says the UK government has prepared a list of Russians that it intends to add to its sanctions list in a 'rolling programme' as long as the Ukraine conflict continues.
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