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Investigations continue into fraudulent ownership of UK property

11 March 2015

A report from Transparency International exposing the use of corrupt capital to purchase UK property has captured the attention of the media this month. Researchers examined data from Metropolitan Police investigations along with Land Registry records of corporate holdings.

Transactions investigated in the UK since 2014 total £180m but UN figures on money laundering practices suggest that detection rates could be as low as 1%. This problem is magnified in London because overseas investors often purchase luxury flats and houses. The average price of property under investigation by the Metropolitan Police’s Proceeds of Corruption Unit (POCU) is £1.5m.

The use of trusts and companies help conceal the identity of the beneficial owner. This involves the use of complex or ‘layered’ ownership structures or offshore companies; nominees to hold property; and complex loans structures and credit finance. All the overseas companies currently under investigation for grand corruption are registered in offshore financial jurisdictions, rather than major markets.

DCI Jon Benton, Director of Operations at POCU states: ‘The lack of access to beneficial ownership information about offshore companies that hold property in the UK is a major barrier for our investigations’.

A key feature of the UK Government’s transparency and trust consultation is to make public a central registry of information on the ultimate beneficial owners of a company. However there is currently no provision to extend this requirement for offshore companies investing in UK property.

Peter Swabey, Policy and Research Director at ICSA, commented that ‘the new UK Government requirements for companies to hold a register of ‘Persons with Significant Control’ is an enormous step forward in terms of corporate transparency, but we must not be complacent, and the more that can be done to increase the visibility of ownership, particularly of overseas companies, the more difficult we make it for criminals to prosper.’

Peter is chairing a working group for the Department of Business Innovation and Skills tasked with drafting guidance to help companies comply with the new requirement. ICSA also contributed to the consultation leading to the publication of ‘Transparency & Trust: Enhancing the transparency of UK company ownership and increasing trust in UK business’.

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