The UK is set to create the world’s first public register of foreign property owners using companies and other structures and arrangements to buy real estate.
The new register will be public and will include those who own or want to buy property in the UK. It will be easily accessible and avoid creating a disproportionate burden or put off legitimate investors.
One of the main aims is to prevent those buying property from hiding behind offshore corporate vehicles as they are regarded as vehicles for hiding illicit funds and laundering the proceeds of crime.
There has been rising concern that the rise in overseas owners of property in London, for example, could be due to criminals using the real estate market.
In order to ‘strike the right balance between improving transparency and minimising burdens on legitimate commercial activity’ the Department for Business, Energy and Industrial strategy has is asking overseas investors, property and transparency experts to submit evidence by 15 May 2017.
Margot James, Minister for Small Businesses, Consumers and Corporate Responsibility: “The UK property market attracts a great deal of inward investment to the UK. This investment benefits the UK economy and supports the construction industry and a host of connected trades across the country. It is something that the UK government is committed to protecting. Therefore it is important to ensure the integrity and reputation of the UK property market.
“The UK property market should be seen as fair, transparent and clean in order to attract the right investors and owners. Honest business should not fear that they are supporting criminal enterprise when investing in UK property. A higher level of transparency will boost investor confidence.”
The consultation document says that the government is concerned about the potential for illegal activity to take place through overseas companies investing in the property sector and explains that some properties are owned through offshore companies in order to obscure their true owners.
“This can make it difficult for regulators, legitimate businesses and the general public to know who the true owners are and can make it very difficult for law enforcement agencies to carry out effective investigations. The use of offshore corporate vehicles to obscure the true owners of UK property has attracted those who wish to hide illicit funds and launder the proceeds of crime,” it says.
Indeed, between 2004 and 2014, over £180m worth of property in the UK has been investigated as suspected proceeds of corruption. In January 2016 the National Crime Agency reported the conviction of a money launderer who had used offshore companies to launder £12m stolen from Commerzbank through council properties in London.
“The secrecy that these offshore companies provided made it difficult for investigators to identify who owned the properties. Greater transparency of property ownership will make the job of enforcement agencies easier and will discourage criminals and the corrupt from choosing the UK to hide or launder their money,” the document adds.
Under the current proposals entities wishing to buy property will have to register their beneficial ownership information with Companies House. If their application is successful they will be allocated a registration number. This number will be required in order to register title to the property at the appropriate Land Registry.
Entities that already own property will be given a transitional year in which they will be free to choose whether to disclose the information and apply for a registration number or dispose of their property.