True owners of 70% of UK properties held offshore "still hidden"

Thursday 07 September 2023

More than two-thirds of UK properties owned through “secrecy havens” like Jersey are still not publishing information about who really owns them, according to a recent study.

The London School of Economics published its findings a year after the UK Government introduced a ‘Register of Overseas Entities’, which aims to list the ultimate owners and beneficiaries of property held via offshore trusts and companies.

The register was introduced in response to Russia’s invasion of Ukraine last February, in particular because the UK has long been an attractive place for wealthy Russians to buy property.

This is often done using offshore structures or, as the LSE report describes them, ‘shell companies’.

The report, which was also authored by the University of Warwick and The Centre for Public Data, found that for 35% of properties owned via ‘overseas shell companies’ (54,000 out of 152,000), “even law enforcement agencies do not know the true identities of the beneficial owners”. 

It added: “In 10% of cases (15,000 properties), the company is missing from the Register of Overseas Entities altogether, and in a further 25%, (39,000 properties) essential information has not been reported.”

Pictured: The report was authored by the London School of Economics, alongside the University of Warwick and The Centre for Public Data.

Picking up on the report, the Times wrote: “Research has found that 109,000 out of the 152,000 properties registered overseas, often in the British Virgin Island and other “secrecy havens”, do not declare their beneficial owners.

The LSE report states: “Although the Register of Overseas Entities is a major step forwards in tackling corruption and improving transparency of land ownership in the UK, there is no point building a dam halfway across a river. 

“The existence of major gaps is threatening the efficacy of the entire register, whether measured against the Government’s previous statements or current policy position.”

The UK Government is currently taking its ‘Economic Crime and Corporate Transparency Bill’ through Parliament. If passed, it will give the Registrar greater powers to investigate, check, remove or decline information provided to it, enhancing its role as ‘gatekeeper’ over incorporations and the information maintained on the public register.

UK Companies House will also be encouraged to actively share data with law enforcement bodies and other public authorities if they suspect fraudulent filings or other suspicious behaviour.

Pictured: The UK Government is currently taking its ‘Economic Crime and Corporate Transparency Bill’ through Parliament.

The LSE report concludes that the bill “will not be sufficient to close the gaps” and it makes ten recommendations, which is says could be incorporated in the legislation.

These include:

• Publishing the title numbers of the properties held via registered overseas entities so that they can be more reliably matched to data published by HM Land Registry.

• Increasing the frequency with which updates to information are notified to and published by Companies House and HM Land Registry.

• Improving enforcement action against overseas entities that have failed to register or that may have supplied insufficient or inaccurate information, by implementing a programme of targeted and random compliance checks.

• Reducing the shareholding threshold needed to trigger identification of a beneficial owner from 25% to 5%.

Amendments to the Economic Crime and Corporate Transparency Bill by several Lords aimed at tightening the rules around the Register were rejected by the House of Commons on Monday after failing to gain the UK Government’s support.

After the loss, long-time financial transparency campaigner Dame Margaret Hodge MP called on the UK Government to “think again”.

“Or we will fail to finally banish dirty money from our economy,” she added.

Commenting on the LSE report, Jersey Finance, which is responsible for promoting the industry, said: "Jersey has had a central corporate register of beneficial ownership since 1989, populated by verified and up to date information.

"It’s a model that puts Jersey well ahead of most other jurisdictions and that has earned recognition from bodies including the Financial Action Taskforce. Jersey has also committed to moving in line with international standards and from an industry perspective we will continue to work closely with the Government of Jersey on that basis.”