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Treat overseas register regime ‘like AML compliance with bells on’, solicitors told

By Monidipa Fouzder >>

(14 October 2022)

Solicitors have been advised to tread carefully if asked to help register foreign owners of UK property under government measures to crack down on money laundering.

The Economic Crime (Transparency and Enforcement) Act 2022 introduced a register of overseas entities, which came into force on 1 August, requiring anonymous foreign owners of UK property to reveal their identities. Overseas entities that already own UK property must register by 31 January.

The register affects clients acting in property transactions involving overseas entities and solicitors asked by clients to verify an overseas entity purchasing UK property.

Law Society guidance on verification states that solicitors leave themselves open to criminal prosecution and may be professionally negligent if they do not comply with the new law.

Edward Craft, a partner at Wedlake Bell, told the Law Society’s flagship property conference yesterday that solicitors should not do anything they feel uncomfortable with.

He said: ‘We had voices within the Law Society saying the guidance should be simple, “do not do it”. I was of the view that would not be helpful for our industry… But do not do anything you’re not comfortable with. Whilst you need to treat it as AML compliance with bells on, you need to look into more things than simply identifying beneficial owners.’

Rachael Watts, Companies House lead for register of overseas entities policy and implementation, told the conference that the verification process is ‘probably not what some might expect. It is very specific to this legislation. Whilst the service is a really good service, we cannot anticipate everything people will need to understand’.

Around 30% of applications have been rejected, which ‘signifies the complexity of the process’, Watts said.

‘We do query information where it does not appear to be correct. What we cannot do is challenge the veracity of the information provided where it appears to be correct, which is the whole point of having it verified by an independent agent.’

The conference heard that the most common query received by Companies House is: who is the beneficial owner? ‘Because the definition is very similar to that for a person of significant control for a UK company,’ Watts said. ‘But it is different to that of money laundering regulations. People are trying to understand the difference between the two.

She added: ‘Whilst the bill was going through parliament, there were some changes that were added. If the beneficial owner is also a trustee of a trust, they have to provide trust information. Adding trusts into what is already quite complex legislation means people asked lots and lots of detailed questions about various trust scenarios.’

Legislation that would give Companies House new investigatory powers, the Economic Crime and Corporate Transparency Bill, passed its second reading in the House of Commons yesterday.

(Courtesy: The Law Society Gazette)