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New legislation aimed at preventing money laundering through UK property market

Criminals using the UK property market to launder money could face up to five years in prison under the newly proposed legislation.

The bill, titled Registration of Overseas Entities Bill, proposes that foreign companies who own British real estate will have to reveal the names of the properties beneficial owners. These names will then be compiled on a public register, enabling authorities to seize assets linked to any criminals. This register of overseas entities beneficial ownership is the first in the world.

The legislation is the beginning of a wide crackdown on money laundering in the UK, with the hopes that disclosing the properties beneficial owners’ names on a registry will make it easier for law enforcement to cut down on criminal activity and increase transparency in the property market.

Individuals may also receive an unlimited fine for failing to reveal their properties true owners name. The bill states that those who do not register their overseas entities once instructed could face up to two years in prison as well as a fine. This same penalty also applies to owners who purposely provide inaccurate information to the authorities.

The bill defines a beneficial owner as someone who:

  • holds over 25% of the shares;
  • controls over 25% of the voting rights; or
  • has a significant influence over the entity.

Explaining the need for new legislation, the bill states: “There has been widespread concern expressed about the lack of transparency around who ultimately owns land in the UK, where the land is registered to an overseas company or other entity. Currently, the information available from the land register about overseas owners of land (or registered leaseholders) is, at best, limited to the entity’s name and territory of incorporation. It is therefore not clear ‘who’ really owns and controls the entity and, by extension, the land itself.”

The bill emphasises the necessity of the overseas entity register, detailing that overseas entities can be used as a vehicle by individuals and criminal organisations to hide and launder money:

“The UK’s property market is particularly attractive because of the UK’s stable and open political and business environment. Law enforcement investigations, including those targeting the proceeds of corruption, are often hampered by an inability to access information about the individuals who ultimately own or control overseas entities that have been used to conceal the proceeds of crime and corruption.”

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