The United Kingdom will consolidate data on land ownership by foreign firms and consider additional steps to crack down on the use of shell companies to purchase property with illicit funds.
The effort, disclosed in a speech Tuesday by Prime Minister David Cameron, will target corrupt individuals who use offshore companies to disguise their ownership of property in England and Wales, where an estimated £122 billion in land is controlled by foreign entities. In an initial step, officials will collect and publish data on foreign landowners currently housed by the U.K. Land Registry, he said.
“This will apply to around 100,000 titles held on the Land Register and will show for the first time the full set of titles owned by foreign companies,” said Cameron in the speech. British officials will also consider requiring foreign firms bidding for government contracts to disclose their beneficial owners, he said.
The government could additionally extend rules for U.K. companies to foreign entities, according to Cameron, who said his administration would review “a number of ways” to improve transparency. Under recently finalized rules, British firms must disclose the identities of their true owners for publication in a governmental register.
The initiative follows a string of news stories and nongovernmental reports over the past year highlighting the vulnerabilities of the nation’s high-value properties to corrupt foreign leaders and other criminals seeking to launder dirty money.
Last month, the U.K.’s Channel 4 aired a documentary showing London estate agents in Kensington, Chelsea and Notting Hill willing to accept large cash sums from undercover reporters posing as Russian embezzlers. The documentary prompted criticism of the agents by National Crime Agency (NCA) Director Donald Toon, according to the Guardian.
In a report highlighting the seeming misuse of London property by former Nigerian governor James Ibori and questions about the ownership of units in One Hyde Park—at one time the world’s most expensive residential building—Transparency International U.K. said that oversight of the country’s real estate market remains fractured and ineffective.
In the majority of cases, ownership records on foreign firms cite corporations in the British Virgin Islands, Jersey and other offshore jurisdictions, rather than individuals, the advocacy group said in July.
The issue is exacerbated by the fact that, under current anti-money laundering (AML) rules, real estate agents must conduct due diligence only on sellers of properties, according to Mark Hayward, managing director of the Warwick-based National Association of Estate Agents. By law, agents need only file suspicious activity reports (SARs) to the NCA on shady buyers.
But failures by professional advisers to file SARs on suspicious buyers aren’t necessarily criminal whenever the incriminating information is communicated under “privileged circumstances,” the criteria of which can include the involvement of a lawyer, Transparency International said in the report.
“Most of our members have had training, but some agents simply bury their heads in the sand when it comes to AML,” said Hayward, whose organization can expel and fine agents up to €5 million for compliance violations.
Despite the prevalent use of cash for high-value purchases, companies in the sector have filed relatively few SARs to date—.05 percent of all reports submitted in 2013-14—and have seen only one set of “substantial” enforcement actions for AML lapses, against three estate agents in March 2014, according to the report.
Although Tuesday’s speech is a sign of progress, lawyers and other advisers will likely find new means to skirt transparency rules and hide the individuals who purchase land through offshore corporations, according to Mike LaCorte, director of investigations firm Conflict International.
There is “a vast array of tax havens over which the U.K. has no control and there needs to be a much better coordinated international response in order to tackle this,” said David Buxton, the chief executive officer of Arachnys, and a former fraud investigator with Control Risk.
“The government has been trying to get the British Overseas Territories that are often used to shelter assets from [tax collectors] to open up, but with little success so far. If they provided more information on companies based there, including beneficial ownership, this would go further towards resolving the root cause of the problem,” Buxton said.
As featured on www.moneylaundering.com