Over two thirds of properties held by overseas shell companies remain anonymous

There is no point building a dam halfway across a river. These gaps are threatening the efficacy of the entire Register [of Overseas Entities].
- Andy Summers, Associate Professor at LSE Law School and III
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Over 70 per cent of properties held via overseas shell companies (109,000 out of 152,000) still do not publish information about who really owns them, despite government commitments to crack down on anonymous ownership of UK property.

This is according to a new report by researchers from LSE, the University of Warwick, and the Centre for Public Data.

The report – released on the eve of Parliament returning to debate the Economic Crime Bill [Sunday 3 September 2023] – finds that for 35 per cent of properties owned via overseas shell companies (54,000 out of 152,000), even law enforcement agencies do not know the true identities of the beneficial owners. In 10 per cent of cases (15,000 properties), the company is missing from the Register of Overseas Entities (ROE) altogether, and in a further 25 per cent, (39,000 properties) essential information has not been reported.

Catch me if you can: Gaps in the Register of Overseas Entities highlights that these gaps are overwhelmingly due to design flaws in the Register of Overseas Entities. The register was introduced in response to the Russian invasion of Ukraine with a pledge to “require anonymous foreign owners of UK property to reveal their real identities to ensure criminals cannot hide behind secretive chains of shell companies”.

The new report also finds:

  • In an overwhelming 87 per cent of cases, where the researchers found that beneficial ownership information was missing or inaccessible to the public, it was due to deliberate choices by government to keep the information out of scope of the legislation, rather than rule-breaking by overseas companies.
  • Rule-breaking accounts for only six to nine per cent of cases.
  • Another four to seven per cent comes from out-of-date or poorly documented record

Economic Crime Bill

On Monday 4th September 2023, the House of Commons will consider Lords’ amendments to the Economic Crime Bill, aimed at closing some of these loopholes, but the government is currently opposing these.

This new analysis combines data from Companies House and HM Land Registry to quantify the scale of the missing information, and the reasons behind it.

The biggest reason for missing or inaccessible information on beneficial owners is the use of trusts. These account for an astonishing 63 per cent of all properties where beneficial owners are hidden from the public (69,000 out of 108,000). An amendment to the Economic Crime Bill proposed by Lord Agnew – who last year resigned from government over its failure to tackle corruption – would shut this loophole but is being opposed by the government.

The report also highlights how flaws in the register of owners of UK companies – known as the ‘PSC Register’ – could also be facilitating corruption. Currently, nominees and trustees owning shares are not required to tell Companies House who they are acting for. The government is opposing an amendment by Lord Vaux that would bring transparency to these arrangements.

The report makes ten recommendations that the government could adopt to close the gaps identified.

Andy Summers, Associate Professor at LSE Law School and LSE’s International Inequalities Institute (III), said: “There is no point building a dam halfway across a river. These gaps are threatening the efficacy of the entire register and the government should close them at the earliest opportunity.”

César Poux, Research Officer at the III, said: “The striking thing is that most of the problems with the register are self-inflicted. There certainly is some rule-breaking, but most of the problems are because the legislation is flawed.”

Anna Powell-Smith, Director of the Centre for Public Data said: “We still don’t know who really owns tens of thousands of properties in the UK. The Government should act to close these loopholes.”

Behind the article

1. III/CAGE Working Paper available at Catch me if you can: Gaps in the Register of Overseas Entities, by Arun Advani, Cesar Poux, Anna Powell-Smith, and Andy Summers.

2. The Register of Overseas Entities (ROE) was introduced by the Economic Crime (Transparency and Enforcement) Act 2022 (ECA2022) with the stated aims of: (1) tackling money laundering and illicit investments using UK land; and (2) increasing transparency and public trust over land ownership in the UK. The register became operational in August 2022, with a deadline of 31st January 2023 for overseas entities already holding UK land to register.

3. The Economic Crime and Corporate Transparency Bill is currently going through Parliament. It returns to the House of Commons on 4 September 2023, to consider amendments made by the House of Lords before the summer recess. Amendments 23 and 117 (by Lord Vaux and Lord Agnew respectively) seek to ensure that nominee and trust arrangements cannot be used to hide ownership of UK companies or property, and both are currently opposed by the government.

4. The report used access to public data from Companies House (the ‘Basic Data Product’ and the Persons of Significant Control Register) and the HM Land Registry’s Overseas Companies Ownership Database, combined with data on UK and overseas companies from Bureau van Dijk’s Orbis database.

5. This research was funded by the Economic and Social Research Council (ESRC) through Research Grant ES/W012650/1, CAGE Research Centre at Warwick (ES/L011719/1), and by LSE International Inequalities Institute, LSE Law, and Warwick Economics