Prime Minister, David Cameron recently announced his determination to tackle “dirty money” in UK property. However, can such plans deliver the substance to bring about meaningful change?
The National Crime Agency estimates that £5 billion a week is being laundered in Britain. The government is concerned that money laundering by foreign criminals is skewing the property market where criminal cash is used to buy UK property.
London is an area of particular concern and it is estimated that 36,000 of the 100,000 properties in England and Wales owned by offshore companies are in London. By purchasing property in so-called “corporate wrappers”, owners are able to keep their details secret. In total about £122bn of property in England and Wales is owned by offshore companies. Whilst Mr Cameron was quick to point out that only a small percentage of such property may have been bought by criminal cash, the strength of the views expressed in his speech indicates that the Prime Minister sees this issue as a sizeable one.
Whilst a consultation will consider the best ways of making property ownership by foreign companies more transparent, Cameron has already revealed some policies he will seek to implement.
One such proposal is that the Land Registry may collate additional data relating to foreign companies owning property in England and Wales. Cameron has asked the Land Registry to publish data this autumn showing which foreign companies own land and property in England and Wales which is expected to reveal some 100,000 titles.
The government has already legislated to ensure that from April 2016, there will be a publicly accessible central registry showing who owns and controls UK companies. At present, a UK company’s annual return lists those people holding legal title to shares, but not beneficial owners such as those who own a company through a trust arrangement, or those who otherwise control a company. Companies which are subject to the FCA’s Disclosure Rules and Transparency Rules (such as listed companies) are obliged to disclose information about their ownership under that regime and will therefore be outside the scope of the new central register. Through the introduction of a central registry, Cameron hopes to “open up a new era of corporate transparency in Britain.” The Prime Minster has recently gone further by saying that he wants to look at whether foreign companies investing in the UK can be required to “step up to the same level of transparency”.
The Prime Minister hopes that greater transparency will make it easier to trace funds used to buy property, allowing money laundering to be more easily detected. However, critics say it is difficult to see how such policies will achieve the goal, given the lengths launderers go to in order to disguise the identities behind foreign shell companies and the origins of their funds.
In practice, it remains to be seen how such proposals would be implemented at the Land Registry and whether the practicalities can match the rhetoric. Given that it is already under pressure and dealing with significant backlogs due to reduced staff and the upturn in the market, new proposals potentially requiring the gathering and collating of additional data may prove onerous.