21 May 2019
British lawmakers issued a report Monday outlining potential loopholes in draft legislation intended to help better identify foreign criminals seeking to launder money in UK property.
The 86-page report by members of the UK House of Lords and House of Commons concluded that the current version of the Registration of Overseas Entities Bill would permit foreign individuals buying real estate in the country to remain anonymous by arranging the purchases through trusts.
The draft legislation, which would create a public register identifying the foreign owners of domestic real estate, also fails to specify which entities would be exempted from publishing their beneficial ownership information in the planned database or from submitting similar data to the UK Companies House, the report said.
Nor does the draft ensure that the information would be up-to-date and accurate, according to the lawmakers, who proposed amending the measure to require annual updates and obligate vendors to submit additional data about a proposed transaction before it occurs.
“This will capture information at the point where any potential money laundering might occur,” the lawmakers said.
Among the recommendations included in the report are proposals to task Companies House or “regulated professionals” with verifying information from overseas entities and to consider the use of civil penalties, rather than criminal sanctions, to streamline enforcement actions against individuals living in foreign jurisdictions. UK officials could back up the civil actions with criminal penalties for non-payment, the lawmaker said.
Once implemented, the register would be the “first of its kind in the world,” but it would need to work with existing anti-corruption measures, according to the report, which cited UK plans to implement the Fifth EU Anti-Money Laundering Directive (5AMLD) in the near future despite the country’s expected exit from the European Union.
A delay in the passage of the registration bill could create “an unnecessary incongruence” with the UK’s 5AMLD legislation, the parliamentarians concluded. “We therefore recommend that the bill and 5AMLD be presented to Parliament as soon as possible,” they said.
“The legislation is well drafted, but there are still some loopholes in the draft bill which, if unaddressed, could jeopardise the effectiveness of this important piece of legislation,” said Lord Edward Faulks, the chairman of the joint committee, in a statement. “In the current political climate, anti-money laundering may not seem an immediate priority, but the evidence we took shows there’s a huge problem, and it’s not going away.”
The measure, which is slated to be finalized later this year ahead of the register’s planned launch in 2021, would also cover foreign land-owners in the British Virgin Islands, the Channel Islands and other British overseas territories.
In a statement, the committee noted that 160 UK-based properties worth more £4 billion were identified in 2017 as having been bought by individuals deemed to pose a high risk of corruption.
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