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Recommendations for Overseas Entities Bill put forward to Government

Monday 20 May 2019

NAEA Propertymark’s response to the Joint Committee’s Call for Evidence on the Draft Registration of Overseas Entities Bill has been taken into consideration and reflected in their recent call for changes.

MPs and peers of the Joint Committee on the Draft Registration of Overseas Entities Bill have warned that international criminals laundering cash through UK property will exploit “significant loopholes” in the current draft legislation if changes aren’t made.

The Draft Registration of Overseas Entities Bill is designed to tackle abuse of the property market by criminals based abroad but has a series of flaws, as pointed out in NAEA Propertymark’s response and now concluded by the Joint Parliamentary Committee in their pre-legislative scrutiny report. The report will now be considered by Government, before a further Bill is put forward to Parliament.

NAEA Propertymark’s response

NAEA Propertymark responded to the Joint Committee’s Call for Evidence on the Draft Registration of Overseas Entities Bill in March and has now seen the vital changes that were stressed being put forward to Government.

NAEA Propertymark’s main comments:

• The draft Bill in its current form will not achieve in its aims, this is largely due to it being self-certified, and Companies House not having the capacity or resource to administer it.

• The Government should seek to ensure that the Register is not self-certified. This will create poor and inconsistent data.

• Companies House will need to be adequately resourced to effectively administer and monitor the Register, as well as to avoid high-risk individuals ‘slipping through the net.’

• Information provided by the Register should accompany Customer Due Diligence checks as required by the UK Money Laundering Regulations. This data should be available to cross reference by professional parties involved in property and land sales.

• Where a beneficial owner cannot be identified, these overseas entities should be allowed to register, but not to enter into property or land transactions.

• A communications campaign needs to be undertaken to inform involved parties of the requirements of the Register.

• Beneficial owners of overseas entities should be required to supply annual updates to the Register.

• The UK Register should be complemented by comparable registers for British Overseas Territories, as is now required by the Sanctions and Anti-Money Laundering Act 2018.

The Committees concerns 

The committee listed five key concerns over the planned register including fears that it would be unenforceable in its present state and that proposed fines “may be seen by fraudsters as a ‘cost of doing business’.

A full list of conclusions and recommendations can be found here.

It also raised the failure to include trusts in its definition of an “overseas entity”, a provision for the UK Government to make exemptions at its discretion, the failure to implement routine verification and limiting the proposed register of beneficial ownership information to cover property registered since 1999 in England and Wales and since 2014 in Scotland.

The report cited an estimate by Transparency International that at least 160 properties worth £4 billion were owned by individuals considered “high risk” for corruption in 2017. A further 86,000 properties in England and Wales had been identified as owned by companies incorporated in “secrecy jurisdictions” such as Jersey, the British Virgin Islands and the Cayman Islands.

Lord Faulks, QC, Chairman of the Committee, said: "We welcome this much-needed legislation as one of the vital tools required to create a hostile environment for money launderers who want to use the UK property market to hide unlawful funds.

“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.

“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.

“Time is of the essence: the Government must get on with improving this Bill and making it law.”

Propertymark resources

NAEA Propertymark’s AML – How to Comply guide is available to members and has been created to arm agents with valuable information and guidance on what is needed from them in order to dodge huge fines or even a prison sentence if not complied with. You can access this guide by logging in to our members area.

AML and Tenant Fees Roadshows are also held across the UK in order to support members with key legislative requirements. You can view the key dates on our Anti-money laundering page along with a list of online training courses.

Join our Introduction to Anti-Money Laundering webinar taking place on 18 June where Mark Hayward, NAEA Propertymark Chief Executive, will outline what agents need to do to comply and what is the latest guidance and legislation.