But a range of lawyers, tax experts, MPs, accountants and transparency campaigners are warning that the much-anticipated register of foreign entities, which was rushed through parliament after Russia’s invasion of Ukraine, is “riddled with flaws and loopholes” and will have no impact on forcing corrupt oligarchs to reveal which UK mansions they own. The register is intended, in the government’s words, to “clean up corrupt elites who launder money through UK property” by forcing secretive overseas companies to reveal the real owner or risk “severe fines” or even imprisonment of up to and five years old. Labor MP Margaret Hodge, who has long campaigned for a crackdown on UK property secrets abroad, complained that the register was “more of a lead balloon” than the “silver bullet that we were promised would stop abuses like laundering money in our real estate sector. “. He said: “The new register is full of flaws and loopholes which mean oligarchs and organized criminals will still be able to evade scrutiny and secretly buy high-end London properties such as Highgate mansions or Kensington mansions. “To really stem the flow of corrupt wealth into our housing market, the Government urgently needs to create an open register of the real owners of UK land and property, not just those owned by companies. Anything less would prove once and for all that this government really is soft on dirty money.” John Cullinene, director of public policy at the Chartered Institute of Taxation, the peak body representing tax accountants, said oligarchs and other members of the corrupt elite would be able to easily exploit “loopholes” in the new rules. He said individuals could legally circumvent the rules by holding property or land in the name of a nominee company or simply by sharing ownership with more than four relatives or friends. “We highlighted a particular loophole in the new law, namely that the legislation requires identification of only the beneficial owners of the company in question and not the land or property itself. That matters because the company could be holding that land as a candidate for a person who doesn’t own the company,” Cullinene said. “The company may belong to a Cayman or Panamanian law firm, for example, which holds the legal title to many properties on behalf of wealthy clients. In this scenario, the names on the register will likely be the partners of the law firm, or perhaps no one at all. The name of the oligarch would not be found anywhere.” Cullinane said that even if an oligarch owned shares in an offshore company that owns a property in the UK, “if they own 25% or less of the shares in that company, nothing needs to be disclosed”. He said: “A family of six could each own a 16.67% stake in the company, thereby bringing it outside the registration requirements.” He pointed out that Alisher Usmanov, who has been subject to British sanctions and is described by the government as “one of Vladmir Putin’s favorite oligarchs”, has said he has transferred assets into irrevocable trusts in the names of his family members, possibly put beyond the sanctions. Cullinane also said a fine of up to £2,500 a day for not complying with the rules was unlikely to be much of a deterrent to the law’s ultra-rich targets. Conservative MP Andrew Mitchell, who has long called on the government to do more to tackle international corruption, said: “It is probably true that bad people will find loopholes to prevent full transparency. If so, it will be up to the government to fill these gaps with speed and efficiency.” Subscribe to the Business Today daily email or follow Guardian Business on Twitter @BusinessDesk Steve Goodrich, head of research and investigations at Transparency International UK, said the law was “not perfect” but “it’s a good start”. He said: “If implemented correctly, this register will reveal who controls offshore companies that own property in the UK. For decades, criminals and kleptocrats have used opaque corporate structures to launder dirty cash into high-end real estate. Now they will have to do it without as much coverage. “Criminals are always looking to stay one step ahead of the law and we have highlighted to the government potential loopholes they may want to exploit. While some will still try to play the new rules, there will be far fewer shadows to hide in. Soon kleptocrats and oligarchs will have to break the law to keep their wallets anonymous.” A spokesman for the Department for Business, Energy and Industrial Strategy said: “The foreign entity register will crack down on foreign criminals using UK property to launder money and achieve greater transparency in the UK property market – with the 25% cap for beneficial ownership is a universal rule. “The potential daily fine of £2,500 for those who do not comply is just one element of the penalties. Individuals could face up to five years in prison and any non-compliant overseas organization will find it extremely difficult to sell, lease or charge for their land.”
