An Emirati prince, a South African race car driver and an alleged fixer for Syrian President Bashar Assad are among the hundreds of individuals who have declared their ownership of U.K. real estate through offshore entities to a new, public database built to curb illicit finance.
Pursuant to the Economic Crime (Transparency and Enforcement) Act 2022, offshore trusts, limited liability companies and other foreign legal arrangements that own property of any value in the U.K. must declare their beneficial owners to the new Register of Overseas Entities by Jan. 31, 2023, or face daily fines as high as £2,500 and up to five years in prison.
Advocates have hailed the registry as a major step forward in Britain’s fight against corruption and money laundering, amid longstanding concerns that foreign kleptocrats and other criminals have used opaque, offshore corporate structures to surreptitiously pour billions of pounds into luxury British properties over the past three decades.
However, despite the government’s claims that the register would put an end to anonymous purchases of British real estate from offshore, ACAMS moneylaundering.com found that a large share of entities that have submitted their details to date complied only by letter, and not in spirit, with the requirement.
Overseas entities own almost 94,000 properties in England and Wales, the U.K. Land Registry shows. As of Tuesday, Sept. 27, a little more than a thousand of them had declared their owners to Companies House, the agency that administers the new Register of Overseas Entities and other corporate datasets, moneylaundering.com found after a review.
More than 300 identified Jersey as their domicile, a little more than 80 identified the Isle of Man, nearly 70 listed Guernsey, more than 60 listed Luxembourg and 20 named Cyprus.
No fewer than 32 of the 273 offshore entities that identified the British Virgin Islands as their domicile to the new register as of Sept. 27 listed a second offshore entity as their beneficial owner, or an overseas corporate services provider acting in their capacity as trustees of offshore trusts.
Nine did not declare any owner on the basis that no one owned at least 25 percent of their shares.
“The law is clear that an offshore entity cannot be filed as the beneficiary of a business covered by the new register,” said Ben Cowdock, investigations lead for Transparency International’s U.K. office. “It is not intended to be a repository of ‘matryoshka doll’ shell companies, but a clear document identifying real people.”
Moneylaundering.com identified 18 BVI limited companies on the new database whose true owners remain hidden behind corporate services providers in Gibraltar, Jersey, Liechtenstein and elsewhere. The corporate services providers are acting as trustees for the ultimate—and unknown to the public—beneficiaries of an offshore trust that controls the offshore entity.
Ten of those 18 “owned” dozens of properties in Britain, including more than 20 apartments in upscale London neighborhoods such as Hampstead, Primrose Hill and St John’s Wood, and named David Pearlman, the owner and director of BC Business Centrum Limited, a corporate services provider in London, as their “due diligence agent.”
In addition to declaring their beneficial owners, overseas entities that own real estate in Britain must also hire a U.K. due-diligence agent—an attorney, banker or other professional regulated for anti-money laundering purposes—to verify their details and their exact links to the property in question before submitting their data to Companies House.
Declaring a trustee as a beneficial owner is permissible, though overseas entities owned by a trust must provide Companies House the name of the trust, personal information of the settlor and beneficiaries, and other details. Unlike the ownership details of other covered entities, trust-related details remain off limits to the public.
Under the Economic Crime (Transparency and Enforcement) Act 2022, a “registrable beneficial owner” can also be a public authority or another legal entity that is already subject to ownership disclosure requirements in Britain.
Whose luxury flat is it anyway?
The Ham & High, a north London newspaper, reported three years ago that James Ibori, a former Nigerian governor jailed in Britain from 2012 to 2016 for embezzling and laundering more than £117 million, used a limited company that BC Business Centrum, the U.K. corporate services provider, set up in Gibraltar to hide his ownership of a multi-million pound home in Hampstead.
BC Business Centrum also created a second limited company in Gibraltar that Ibori used to purchase an apartment in nearby Maida Vale with the help of his mistress, Udo Amaka Okoronkwo, the newspaper reported at the time.
There is no suggestion of wrongdoing by BC Business Centrum or Pearlman, its owner and director, who could not be reached for comment by press time.
“While the data from these filings fails to tell us who really owns U.K. property, it does give us unique insight into their agents and intermediaries,” said Cowdock, the investigator for Transparency International. “Not only can we see the names of the professional services providers, but also which government agency is supposed to be keeping an eye on their compliance with anti-money laundering rules.”
In the weeks before the new declaration requirements took effect, the U.K. Law Society warned attorneys to exercise “extreme caution” before attesting to the accuracy of ownership data they file to the register on behalf of others, noting that any professional who submits “false, misleading or deceptive” details could incur fines and a prison sentence.
Helena Wood, an associate fellow with the Royal United Services Institute in London, said those risks may drive the bulk of third-party attestations from law firms to corporate services providers.
“It’s going to push it towards an under-supervised sector where there are good actors, but also many bad actors,” said Wood. “This puts more onus on HMRC [HM Revenue & Customs, which regulates the sector for AML purposes] to take a much more robust position on how it scrutinizes that sector.”
Six of the 273 BVI-based firms whose names appeared on the Register of Overseas Entities as of Sept. 27 declared Butterfield Bank, a private bank in Bermuda, as their beneficial owner. One declared a large Israeli company.
Six others listed a U.K. company, which must already declare their true owners to one of the other databases administered by Companies House—the People with Significant Control register—under rules that came into force in April 2016.
Soulieman Marouf, a U.K. property developer and restaurateur once blacklisted by the EU for his links to Syrian President Bashar Assad, declared his beneficial ownership of at least eight properties to the register in August, including several apartments in north London and two luxury flats overlooking the river Thames.
The Guardian first revealed Marouf’s U.K. property portfolio, which at the time reportedly included six luxury apartments in London worth around £6 million, in 2016, while covering the Panama Papers.
Other prominent individuals who publicly declared their ownership of U.K. real estate since August include Jody Scheckter, a South African businessman and one-time Formula One champion who owns an apartment in Chelsea, and Maktoum al Sharqi, the son of the ruler of the Emirate of Fujairah, who owns a luxury flat in nearby Kensington.
Jonathan Benton, former head of the U.K. National Crime Agency’s International Corruption Unit, told moneylaundering.com that the register has immediately given journalists, nonprofits and asset recovery professionals a much better chance of locating suspicious entities and their owners.
Government anti-corruption and financial crime investigators will see less benefit, he said.
“Law enforcement gets this information fairly quickly anyway, there’s a 24-hour turnaround for requests to the BVI,” said Benton, now director of Intelligent Sanctuary, an asset tracing company in London. “There is a much wider issue around resourcing and getting the right powers—we’re not currently building the army to fight it [kleptocracy].”
The U.K. Department for Business, Energy & Industrial Strategy, which oversees Companies House, did not respond to a request for comment on moneylaundering.com‘s findings by press time.
Contact Koos Couvée at firstname.lastname@example.org
|Topics :||Anti-money laundering , Know Your Customer , Corruption/Bribery|
|Document Date:||October 6, 2022|