Ministers take aim at kleptocrats’ properties

Overseas owners of UK property will have to reveal their identities or face fines of £500 a day and up to five years in prison. A law to make it easier to seize properties bought with dirty money and fines for those who hide their ownership behind shell companies will be introduced to parliament today (1 March). The legislation will create a Register of Overseas Entities, which business secretary Kwasi Kwarteng (pictured) said would “crack down on foreign criminals using UK property to launder their money”. Property-owning companies that do not reveal their owners’ identities will be fined £500 a day, chargeable against the property. The companies will not be able to sell off assets while in breach of the rules. The new register will apply retrospectively to property bought up to 20 years ago in England and Wales, and from 2014 in Scotland. Announcing the legislation in the Commons yesterday, Kwarteng said: “Oligarchs and kleptocrats from Russia and elsewhere have used the veneer of legitimacy provided by UK-registered companies and partnerships. They have also used high-end property to help launder proceeds of corruption.” He added: “The new register will require anonymous foreign owners to reveal their real identity to ensure that criminals cannot hold property behind secretive chains of shell companies. By legislating now, we will send a clear warning to those who have, or who are thinking about using the UK property market to launder ill-gotten gains – particularly those linked to the Putin regime.” Reforms will also be made to Companies House. “At present, Companies House has very limited powers to prevent this abuse,” Kwarteng told MPs. “In light of Russia’s outrageous actions in recent days, it is necessary that we put these criminals on notice, and send a message that the UK will not tolerate their corruption here.” The changes to Companies House – contained in a white paper on corporate transparency and register reform – were consulted on in 2020, but were subsequently shelved. Foreign secretary Liz Truss told the Commons earlier that sanctions would be “focusing on their houses, their yachts and their lives”. The £500-a-day fine has been derided as “not even peanuts to these people” by some, with others suggesting that the properties should instead be immediately confiscated. However, the fines will be chargeable against the property, meaning that unpaid charges could amount to £182,500 over a year. After five years the charge on the property would be nearly £1m. Like any charge held over a property, it will eventually lead to the seizure of the asset if it is not paid. The changes will also bar those accused of laundering money from claiming costs against law enforcement agencies, which the government hopes will allow more unexplained wealth orders to be issued and pursued. Only four such orders have been used successfully since they were introduced in 2018, with agencies put off using the powers for fear that judges will award costs against them if they fail. To send feedback, e-mail piers.wehner@eg.co.uk or tweet @PiersWehner or @EGPropertyNews Photo © Alastair Grant/AP/Shutterstock