The draft Registration of Overseas Entities Bill sets out provisions to establish a new beneficial ownership register of overseas entities that own UK property. The release of the Draft Bill follows the Government’s commitment made at an Anti-Corruption Summit in 2016 to establish such a register, in order to combat money laundering and achieve greater transparency in the UK property market. That register has a wider ambit than the current Register of beneficial ownership (the “People with Significant Control Register) notwithstanding the transposition of the EU’s Fourth Anti Money Laundering Directive into UK law in June 2017.

The effect of the new Bill is that foreign companies owning UK properties will have to reveal their ultimate owners on the world’s first public register. To that end, there has long been concern that the UK’s property market is particularly attractive to those seeking to launder criminal gains. There is currently a perceived lack of transparency around who ultimately owns land in the UK, where the land is registered to an overseas company or other entity. To that end, according to analysis by Transparency International of data from the Land Registry and the Metropolitan Police Proceeds of Corruption Unit, between 2004 and 2014 over £180m worth of property in the UK has been brought under criminal investigation as the suspected proceeds of corruption, and, crucially, three in four of these properties involved the use of off-shore corporate vehicles. Similarly, a World Bank review reported that 150 of the 213 grand corruption cases investigated involved the use of at least one corporate vehicle to hide beneficial ownership and the true source of funds. In these 150 cases, the total proceeds of corruption were approximately $56.4bn

The new Register is described as having the following primary objective: “to prevent and combat the use of land in the UK by overseas entities for the purposes of laundering money or investing illicit funds by increasing transparency in overseas entities engaged in land ownership in the UK”. To support the proposals and structure of the Register and underlying Bill, the government commissioned research aimed at understanding the potential impacts of the proposed register through qualitative interviews with industry stakeholders. The impact assessment makes for interesting reading.

The Bill will require any overseas entity that wishes to own land in the UK to take steps to identify their beneficial owner(s) and to register them. Once registered, an overseas entity will obtain an overseas entity ID and will be required to update their information annually, until such time as it successfully applies to be removed from the live register of overseas entities. In order to comply with the updating duty, the overseas entity will have to annually deliver updated information (or confirm that the information in relation to it on the overseas entities register is up-to-date) and statements required for registration and will have to have taken steps to identify registrable beneficial owners (including sending notices to such beneficial owners). Failure to provide an update on the information held on the register is an offence under the Bill, as is delivering (or causing to be delivered) misleading, false or deceptive information. The same is met with custodial sentences.

As explained in the Governments’ overview document, clauses 1 to 16 of the Bill create the register and the framework through which an overseas entity can apply to be registered. Once registered, an overseas entity is required to update the information annually until such time as it successfully applies to be removed from the register.

The Bill contains five Schedules:-

A. Schedule 1 sets out the information required about an overseas entity, its beneficial owners, and if applicable, its managing officers for the purposes of (i) the application to register as a “registered overseas entity”, and (ii) the updating requirements (set out in clause 7 of the Bill).

B. Schedule 2 sets out who the beneficial owner of an overseas entity is. This is modelled on the PSC regime for UK companies and other UK entities.

C. Schedule 3: Part 1 inserts new provisions (“Schedule 4A”) into the Land Registration Act 2002 (“LRA 2002”). Schedule 4A sets out the circumstances in which overseas entities may apply for registration as proprietor of land, and the restrictions that will be imposed on overseas entities that own land. Part 2 of Schedule 3 provides for a transitional regime for certain overseas entities that own qualifying land when the Bill comes into force. These entities will have 18 months from the commencement date to either provide beneficial ownership and other information to the Registrar as part of an application to register or to dispose of the land if they do not wish to register.

D. Schedule 4 makes provisions equivalent to the provisions in Schedule 4A described above for Scotland, subject to the differences in land registration in Scotland.

E. Schedule 5 makes provisions equivalent to the provisions in Schedule 4A described above for Northern Ireland, subject to the differences in land registration in Northern Ireland. The key difference is that the requirements will only apply to new purchases by overseas entities on or after the commencement date. Existing overseas entities that own land prior to commencement are outside of scope because it is not possible for the Northern Ireland Land Registry to identify them

The Bill demonstrates a wider effort by Government to tackle potential financial wrong doing within the UK. The release of the Bill comes the same week as the first Undeclared Wealth Order is being considered in the High Court.

The consultation for the Draft Bill closes on the 17th September 2018; responses are encouraged.

Colin Witcher and Fiona McAddy are both members of Chambers’ Corporate Crime and Regulatory Team, with experience in financial crime, asset forfeiture and confiscation.

Relevant Links

Overview Document: Draft Registration of Overseas Entities

Register of Overseas Entities

Draft Registration of Overseas Entities Bill