UK property ownership transparency will speed up the fight against fraud, says expert

Requiring the Land Registry to publish information about foreign companies that own property in England and Wales could ultimately speed up the recovery of money from fraudsters who have “hidden” victims’ money in a variety of corporate structures, an expert has said.

UK prime minister David Cameron announced new measures designed to end the use of offshore companies to disguise the purchase of high value UK property with “plundered or laundered cash” in a speech in Singapore. More than 100,000 property titles worth around £122 billion are currently registered to offshore companies, he said.

Civil fraud and asset recovery expert Alan Sheeley of Pinsent Masons, the law firm behind Out-Law.com, said that the current system created a “breeding ground for sophisticated fraudsters”.

“A truly open, transparent property system identifying the ultimate beneficial owner of English properties will assist the fight against fraudsters and ultimately aid in recovering stolen money for victims,” he said.

“Currently, offshore trust companies allow fraudsters to create property holding vehicles (PHVs) with ease. These allow fraudsters to buy property in England with, as David Cameron says, ‘plundered or laundered cash’ with no visibility as to who the true ultimate beneficial owner is,” he said.

“Civil fraud solicitors who pursue a fraudster that has taken a client’s money then needs to follow the money trail through various banks, normally in offshore jurisdictions. This requires the use of a specialist civil fraud solicitor to obtain disclosure orders in the relevant jurisdictions which takes time and money – both of which are true luxuries when you are a victim of fraud,” he said.

Cameron’s speech came a week after anti-corruption campaigners Global Witness alleged that the ultimate ownership of “big chunks” of prime property in central London could be linked to a corrupt former Kazakh secret police chief. Cameron made reference to the case in his speech, as an example of the need for action to prevent the UK from becoming “a safe haven for corrupt money from around the world”.

“The vast majority of foreign-owned businesses that invest in property in the UK are entirely legitimate and proper, and have nothing at all to hide,” he said.

“But I want to ensure that all this money is clean money. There is no place for dirty money in Britain. Indeed, there should be no place for dirty money anywhere. That is my message to foreign fraudsters: London is not a place to stash your dodgy cash,” he said.

As a “first step”, the Land Registry would publish data showing “for the first time” the full set of titles owned by foreign companies this autumn, Cameron said. The government would also consult on potentially extending new transparency requirements for UK companies to foreign companies too, and would “look carefully at the case for insisting that any non-UK company wishing to bid on a contract with the UK government should also publicly state who really owns it”.

The UK committed to the creation of a central registry of companies’ beneficial owners, meaning those that hold more than 25% of a company’s shares or voting rights, as part of its G8 presidency in 2013. The requirements will apply to all UK bodies corporate that currently register information on their members at Companies House, including limited liability partnerships, and the register will be made available for public inspection. It is due to be up and running next April.

“This will open up a new era of corporate transparency in Britain,” Cameron said in his speech. “But, of course, it will only apply in Britain and for British companies. So the aim should surely be for others to follow.”

“To really tackle corruption effectively, we need to be able to trace data from one country to another. We don’t want criminals to be able to go unnoticed, just because they move money across borders or have assets in different countries. The torchlight should be able to follow them,” he said.

He said that the UK government would “continue to make the case for transparency with international partners”, including those in the British Overseas Territories and Crown Dependencies, he said. It would also host an international anti-corruption summit in London next year, he said.

Anti-corruption and corporate crime expert, Neil McInnes, of Pinsent Masons MPillay the Singapore joint law venture partner of Pinsent Masons, said: “It is significant that the UK prime minister chose to speak about the global threat posed by corruption on his recent visit to Singapore. For many, Singapore has built its enviable reputation as a key financial market and global hub through its pioneering stance on anti-corruption, with consistently high rankings in international surveys over many years”.

“From a compliance perspective, the speech has wider significance too. Developed economies with high end property markets and strong financial centres face additional challenges from international corruption – namely, the by-product of bribery, money laundering,” said McInnes. “The UK prime minister’s remarks reflect this. Sophisticated criminal enterprises will be invariably attracted to those international markets and economies in order to launder the proceeds of their overseas bribery. And here there are comparable challenges faced for the UK and Singapore, so, as alluded to in the speech, we can expect to see ever greater cooperation between the countries’ respective law enforcement agencies, to share intelligence and to assist one another with cross-border investigations to tackle money laundering as well as corruption.”