Over two-thirds of properties in the UK held by overseas shell companies still do not publish information about the identity of their owners. That’s according to new research from the London School of Economics (LSE), the University of Warwick (UoW), and the Centre for Public Data (CPD). The damning research came just one day before parliament refused to close gaps in the law allowing these anonymous property owners to flourish.
Anonymous property owners
The report found that law enforcement agencies didn’t even know the true identities of 35% of the owners. Anna Powell-Smith, director of the Centre for Public Data, stated that:
We still don’t know who really owns tens of thousands of properties in the UK. The government should act to close these loopholes.
The report said the identity of property owners was hidden for 109,000 out of 152,000 properties held via overseas companies. That’s around 70%. The main reason for “missing or inaccessible information” was the use of trusts. These accounted for 63% of the overall figure. In 25% of cases (39,000 properties), essential information wasn’t reported.
The register of owners of UK companies itself is known as the People with Significant Control (PSC) register. The report also highlighted how shortcomings in the PSC could allow corrupt practices. At present, nominees and trustees owning shares are not required to tell UK authorities who they are acting for.
‘Self-inflicted’ problems
César Poux, research officer at LSE’s International Inequalities Institute, stated that:
The striking thing is that most of the problems with the register are self-inflicted.
There certainly is some rule-breaking, but most of the problems are because the legislation is flawed.
The government has previously committed itself to cracking down on the anonymous ownership of UK property. To this end, it created the Register of Overseas Entities (ROE). However, the report found that for 15,000 properties (10%) the company was absent from the ROE altogether.
On 4 September, parliament debated amendments to the Economic Crime Bill aimed at closing some of the loopholes. In the Commons debate, ex-justice secretary Robert Buckland supported the amendments, stating:
We do not want to be a jurisdiction where it is too easy to commit fraud that benefits corporates.
Where there is a criminal legal framework that is clear, certain and stable, that can only encourage investment into the United Kingdom.
However, MPs struck down several key amendments to the Bill. The proposed changes would have placed the onus on all companies to prevent fraud, rather than law enforcement. The previous rules only applied to large businesses, leaving small-to-medium-sized enterprises (SMEs) off the hook. Crucially, excluding SMEs means that the law applies to just 0.5% of businesses. MPs also voted against improving the transparency of company and property ownership.
‘Burdens on business’
Business minister Kevin Hollinrake argued that the amendments would:
pose significant and disproportionate burdens on business.
And there we have it: ensuring that they are not committing property fraud is an undue burden for business.
The Bill itself will continue on through parliament. However, with MPs who take a distinctly lax attitude toward transparency and money laundering at the helm, anonymous overseas property ownership looks set to remain in the UK for quite some time.
Additional reporting via Agence France-Presse
Featured image via Wikimedia Commons/TobiasSchumann(WMDE), licensed under the Creative Commons Attribution-Share Alike 3.0 Unported license.
