UK Parliament looks to deter money laundering through real estate purchases

On May 20, 2019, the Joint Committee of the UK Parliament on the Draft Registration of Overseas Entities Bill published a pre-legislative scrutiny report including a draft of the Bill.  The purpose of the legislation is to establish, by 2021, a publicly accessible register of the beneficial owners of overseas entities that own or purchase land, in order to increase transparency surrounding the ownership of real property in the UK.  The pre-legislative scrutiny report assesses whether the draft legislation is likely to fulfill its stated purpose.

In the report, the Committee expresses concerns that trusts, which are not covered by the draft Bill, could be used to circumvent the registration requirement.  Since implementation of the Fifth EU Anti-Money Laundering Directive, to which the UK government is committed, would close this loophole, the Committee recommends that the two measures should be introduced simultaneously, and without delay.

The Committee also recommends that the threshold for ownership and the definition of beneficial ownership should align with those of the People with Significant Control register framework.  Exemptions to compulsory registration, which may be granted to certain entities such as foreign governments, should be limited, and the number of exemptions should be published regularly.  In addition, the Committee notes that the Bill cannot be effective unless it includes a provision for annual updates, and for verification checks to identify false information.  Finally, the Committee recommends that the Bill include enforcement measures such as civil penalties, which could be backed up by criminal sanctions for non-payment.

UK Parliament news release | Draft bill

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