Britain has long been a haven for people of negotiable integrity to stash their cash, often via property deals made with the help of an army of lawyers, PR advisers and bankers.
By Lawrence Booth vervetimes.com
Not only are super-mansions in London and the home counties a safe bet from an investment point of view, but the ability to disguise ownership via a labyrinthine network of shell companies offers a degree of anonymity to those who prefer their financial dealings to remain secret.
On top of that, the Companies House database – the repository for details of UK-registered businesses – has become almost a punchline to a pretty bad joke.
Information is often missing, incomplete or obviously fake. Directors have been registered in the name of Adolf Tooth Fairy Hitler and Judas Superadio Iskariot, without anyone batting an eyelid. Information can be hard to search for and the website crashes or times out on a regular basis.
On Monday, amid pressure to crack down on the billions of pounds in Russian “dirty money” flowing through London, the business secretary, Kwasi Kwarteng, brought forward measures designed to clean up the mess. They include a register of properties owned by overseas investors, in theory preventing them from disguising their identities.
“By legislating now, we’ll send a clear warning to those who have or are thinking about using the UK property market to launder ill-gotten gains,” Kwarteng said.
Companies House will also be “upgraded” to improve the quality of information available from its database and there will be measures to strengthen “unexplained wealth orders”, which give law enforcement bodies the power to seize assets where they suspect criminality may have occurred.
Long-time anti-corruption campaigners are relieved, if frustrated at how long it has taken Britain to relinquish its role as obsequious financial butler to what the business department now calls “corrupt elites”.
“It’s about bloody time,” said Susan Hawley, executive director of Spotlight on Corruption.
She said campaigners had “been waiting six years” for measures like these, ever since an anti-corruption summit in 2016, adding: “These measures are a good start but on their own will not be enough to plug the loopholes in our defences against dirty money.
“We need a massive investment in law enforcement capability so they can get on with investigating unexplained wealth, and with investigating and prosecuting money laundering breaches and sanctions evasion.”
Already, there is scepticism about whether the super-rich and super-nefarious will be able to flout the rules. For instance, while the “ultimate beneficial owner” of a property will have to be disclosed, that could still be a legal entity or a company. If that entity is itself in a jurisdiction that permits corporate secrecy, there will be no way to unravel the final links in the chain to the person at the very top.
Graham Barrow, of the Dark Money Files podcast, has consistently exposed some of the more ludicrous failings of Companies House to provide legitimate data. He pointed out that these rules are similar to those for “persons of significant control” disclosures that, in theory, tell you who owns a company.
“We know from experience that they can be circumvented by declaring that there is no one who meets the definition of a ‘beneficial owner’,” he said. “Whilst there are penalties for making a false declaration, knowing who is behind an entity in a location like the Marshall Islands, the Seychelles or BVI is not a straightforward task.
“Without adequate human and financial resources, along with cooperation from overseas territories, the requirements look difficult to enforce effectively”.
Hawley raised misgivings about measures to target those trying to evade sanctions, a hot-button topic as ministers target Russian oligarchs and Kremlin officials. “It isn’t clear that this bill goes far enough in giving law enforcement the real tools to bring criminal cases for sanction evasion,” she said. “There hasn’t been a criminal sanctions evasion case for over 12 years.”
Barrow also declared it “deeply disappointing” that the government was not acting faster. “Companies House continues to be abused on a daily basis and further delay simply opens the door to more and more criminals.”
One campaigner, who asked not to be named until he had spent more time analysing the detail, was more sanguine about the prospect of the financial chicanery that may go on as the corrupt and secretive hide their assets elsewhere in the period between the proposals being announced and implemented.
“The gate will be open for a while,” he said. “But I’d rather get a decent piece of legislation than try to pass it in three hours. We can’t turn back the clock. We are where we are.”