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NAEA Propertymark submits evidence on the Draft Registration of Overseas Entities Bill

Friday 15 March 2019

The Joint Committee on the Draft Registration of Overseas Entities Bill issued a Call for Evidence earlier this month.

NAEA Propertymark has long called for a public register of overseas beneficial owners. Property is a high-risk sector for laundering money, with the true identity of owners often hidden through the illegal use of overseas shell companies.  

Estate agents face issues when trying to determine the true, or ‘beneficial’ owner, only to be faced with an untraceable shell company. These companies enable the concealment of criminal funds through property purchase. In the UK, these companies are often used to purchase the most exclusive of properties, particularly in London. The Home Office estimates that around £90 billion is laundered in the UK each year.

The Draft Registration of Overseas Entities Bill was presented to Parliament in July 2018. The Joint Committee was formed earlier this month to scrutinise the legislation. It includes both MPs and Lords and it is tasked with reporting back to Parliament with its recommendations for the Bill.

What are we are calling for?

In our submission to the Joint Committee, we made it clear that in the Bill’s current format, the operation of the Register would not be fit for purpose. We are concerned that the Register will be used as a standalone entity, data will not be correctly certified, and Companies House will not have the resources to effectively monitor and administer it. We want to ensure that when implemented, the Register works smoothly for estate agents and will contribute to the fight against money laundering.

Anti-money laundering

We think that by the Register working alongside the requirements of the Money Laundering Regulations 2017, the fight against money laundering and terrorist financing will be reinforced. Information that is provided by the Register should accompany Customer Due Diligence checks administered by property agents, legal professionals and those in the financial sector. The available data should be available to cross-reference, creating a higher level of verification and providing equivalence. Through this ability to cross-reference, property agents, finance professionals and solicitors will be able to report any discrepancies in Customer Due Diligence findings.

Certification

The Government should seek to ensure that the Register does not operate on a self-certified basis. This system of certification leaves the Register open to abuse as it has the potential for users to submit false information. If falsified information is allowed into the Register, the reliability of the data will be questionable. The Register has been modelled on the existing register for People with Significant Control (PSC), which is also self-certified and monitored by Companies House. The Government needs to learn from past mistakes made with the PSC and ensure that the Register is not self-certified.

Administration

For the Register to be effectively administrated and monitored, Companies House needs to be properly resourced. Without adequate resources, we are concerned that standards will be relaxed, and information held in Register may not be reliable. In 2008 a data management firm discovered that 1,504 disqualified directors were being allowed to run other UK companies through cross-referencing Companies House data with a list of high-risk individuals. We are concerned that this could be repeated, rendering the information in the Register as unreliable. Furthermore, the Treasury Select Committee has identified Companies House alongside estate agency as ‘weak spots’ in the system. If information held in the Register is unreliable, this could have a significant impact on law enforcement agencies investigating illegal activities.

You can read more of our submission to the Joint Committee on the Draft Registration of Overseas Entities Bill here. It discusses further technicalities and clarification that is required from the legislation moving forward.

What are we doing to help you?

Earlier this month, the Treasury Committee released its report on Economic Crime. NAEA Propertymark Chief Executive, Mark Hayward, is quoted throughout following the evidence he gave as part of the Inquiry in June 2018.

Find out more about our work on the Money Laundering Regulations 2017 in the Lobbying section of the website, where you’ll also find dates for our AML and Tenant Fees Roadshow.

After some more in-depth information? We run courses on Anti-Money Laundering specific for estate agents at Foundation, Intermediate and Advanced levels, which can be logged as CPD. If you’ve not done so already, book your place here.

NAEA Propertymark is a partner of the Government’s Flag it Up campaign.

What happens next?

The deadline for written submissions is Monday 18 March. The Committee will be taking further oral evidence sessions from stakeholders on 18 March and 25 March. A recommendations report will be issued by the Committee to both Houses of Parliament by 10 May 2019. NAEA Propertymark will communicate any developments in due course.