More than two-thirds of English and Welsh properties held by foreign shell companies do not report the identity of their owners, according to analysis that found significant flaws in laws meant to prevent oligarchs from hiding their wealth.
The UK government hurriedly introduced a register of overseas entities in August 2022 after Russia’s invasion of Ukraine in February that year, in an attempt to “flush out corrupt elites laundering money through UK property”. However, critics said there were severe flaws in the rules from the start.
The true owners of more than 100,000 properties in England and Wales controlled via overseas shell companies are not public, despite the rules that came into force on 31 January, according to the report published on Monday by researchers from the London School of Economics and Political Science (LSE), the University of Warwick and the Centre for Public Data.
“We still cannot know whether sanctioned individuals, money-launderers or other corrupt individuals may be benefiting from these properties,” the report found.
Yet legal loopholes are used to obscured the ownership of the vast majority – 87% – of the properties, the analysis found. Between 6% and 9% were owned by companies that had ignored the law requiring them to sign up to the registers, while the rest had “out-of-date or poorly documented records”, the authors said.
Corruption watchdogs and MPs have long warned that the lack of information on the true owners of the 152,000 properties owned by overseas entities made the UK, and particularly London, are an attractive haven for the proceeds of crime and corruption. The lack of information also makes it harder to freeze assets if a person is placed under sanctions.
The analysis found that trusts were used to hold property in 63% of those with obscured overseas ownership. Trusts allow one person to hold property for the benefit of another, often a family member, but they can also conceal ownership because they do not have to be registered in the same way as companies. Trusts have been found to have been used extensively by Russian oligarchs, whose property holdings have been revealed in some cases only thanks to leaks of private data.
Andy Summers, an associate professor at the LSE, 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.”
The government has resisted attempts to list the beneficiaries of trusts in public without a consultation. In a letter to Lord Agnew, who resigned as a minister in January 2022 because of frustration over the lack of government action to prevent fraud, the government last month said a move to close the trust loopholes would be open to legal challenge because it could impinge on trust beneficiaries’ privacy.
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The government is also opposing changes that would require nominees and trustees owning shares to tell Companies House, the UK’s company register, who they are acting for.
The House of Commons is due to consider Lords amendments to the economic crime bill, aimed at closing some of these loopholes, on Monday, but they face little prospect of passing without government support.
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