As MPs head into their summer break, some vital legislation is being delayed until autumn.
One important piece of unfinished business is the economic crime and corporate transparency bill (ECCTB). Although its name is rather a mouthful, it is clear about the intentions: this bill takes an important step forward in the fight against dirty money and the crimes it enables.
Ordinary people buying houses and other land directly have long been required to report their ownership to the Land Registry, with records available for anyone (nosy neighbours included) to look up. Since 2016, properties owned by a UK company have also been traceable.
But these rules left a fairly obvious hole that could still be exploited by the wealthy and well-advised, if they wished to keep their ownership secret: just own via a foreign company. This created an environment in which more than 130,000 properties across England and Wales were registered to foreign companies, the majority with unknown owners.
Some of these properties, especially in London, have been used to hide and launder the proceeds of crime. Last year, Transparency International estimated £6.7bn of UK property had been bought with dirty money. Of these, almost a quarter were “bought by Russians accused of corruption or links to the Kremlin”.
Russia’s invasion of Ukraine finally tilted the government into action, as part of efforts to identify where sanctioned individuals were hiding their wealth. A new law passed last year required foreign companies who own UK land to disclose and publish their owners. This information is available for anyone to search via Companies House. But in this game of offshore cat-and-mouse, one important gap remains: trusts.
A trust allows those who actually benefit from owning an asset (the “beneficiary”) to hide behind the person who manages it for them: the “trustee”. Even under the new rules, when property or land is held by a foreign company that is acting as a trustee, it is effectively these managers who end up on the public register, not the real beneficiary.
The real beneficiary is sometimes known to HMRC, which has started keeping a register of trusts and those who benefit from them, but there are many loopholes here also. For example, by adding yet another layer of corporate ownership between the trust and the UK land, in practice beneficiaries can hide themselves from HMRC as well. And in any case, HMRC does not publish this information, meaning their name remains hidden from the public – a privilege not afforded to ordinary homeowners, or even owners of UK companies.
Which brings us back to ECCTB. An amendment proposed by Lord Agnew – the Tory ex-minister who resigned over the government’s failure to tackle Covid loan fraud – would finally shut this loophole. The beneficial owners of all overseas companies owning UK property would have to be reported publicly, whether trusts are involved or not. No more two-tier system for the benefit of those with something to hide and the money to set up structures offshore.
As yet, it isn’t clear whether this amendment will be accepted by the government, although common sense suggests it should be. Leaving these gaps in place would frustrate the entire purpose of the rules, and allow the kind of dubious money that has earned the capital the nickname “Londongrad” to keep flowing.
Some trust beneficiaries will protest against this intrusion on their privacy, often citing vulnerabilities. These concerns are not to be dismissed out of hand but there are already rules that allow individuals at risk of specific harms to keep their information off the public register. It is hard to see why blanket privacy should be available only to those with the money to create byzantine structures to hide their ownership.
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The current lack of transparency also has real-world consequences for the rest of us. If there’s a disturbance from a neighbouring property, or a local footpath has suddenly been fenced off, it’s not unreasonable to want to know the owner. If you’re buying a property, finding out the identity of the would-be seller is basic due diligence. These are considerations that motivated the creation of a public register of land in the first place, and they should apply to everyone.
The summer leaves time for MPs to reflect on the importance of tackling dirty money, and the reasons they tried to tackle hidden ownership in the first place. There is no point leaving this job half-done, because the people seeking out the last places to hide are the ones who we most need to find. Lord Agnew has put the ball in the government’s court, and they must know that voters will be watching their next move.
