Analysis has shown that more than two-thirds of properties in England and Wales held by foreign shell companies do not disclose the identity of their owners, revealing significant flaws in laws designed to prevent wealthy individuals from concealing their wealth.
The UK government introduced a register of overseas entities in August 2022 following Russia’s invasion of Ukraine, with the aim of combating corruption and money laundering in the UK property market.
However, critics have argued that these regulations had serious shortcomings from the beginning.
Foreign Shell companies still conceal owners
The research, conducted by experts from the London School of Economics and Political Science (LSE), the University of Warwick, and the Centre for Public Data, found that over 100,000 properties in England and Wales controlled by foreign shell companies still do not have publicly disclosed owners despite the regulations that came into effect on January 31.
The study also revealed that legal loopholes are being exploited to obscure the ownership of 87% of these properties.
These loopholes include properties owned by companies that have ignored the registration requirements, as well as those with outdated or poorly documented records.
Trusts were identified as a common mechanism used to hold property in these cases, allowing individuals to hold property for the benefit of others while maintaining anonymity.
Trusts are not subject to the same registration requirements as companies and have been used by Russian oligarchs to conceal their property holdings.
Critics have argued that these gaps in the regulations threaten the effectiveness of the entire register and have called on the government to close them promptly.
However, the government has resisted efforts to list trust beneficiaries in public due to privacy concerns and has opposed changes that would require nominees and trustees owning shares to disclose their identities to Companies House.
The House of Commons is expected to consider amendments to the economic crime bill designed to address these loopholes, but their chances of passing without government support are uncertain.
