The UK's new system for holding information on those with beneficial ownership relating to property is now up and running, and lawyers argue that there remain challenges in making the system work.

The UK’s new Register of Overseas Entities has been launched today and solicitors warn that preparing for the new regime is an onerous task.

Overseas entities that hold qualifying interests in UK property have until 31 January 2023 to register details of their beneficial owners with Companies House (as well as those which have disposed of such interests on or after 28 February 2022). 

This new register forms part of the government’s strategy to combat economic crime. Overseas entities that own UK land or property must declare their beneficial owners or managing officers. Companies House states that there will be “severe sanctions for those who do not comply,” including restrictions on buying, selling, transferring, leasing or charging their land in the UK.

From 5 September 2022, overseas entities which acquire such interests must be registered in the ROE before an application can be made to register the acquisition in any of the UK land registers.

The new requirement over beneficial ownership disclosure was created under the Economic Crime (Transparency and Enforcement) Act 2022. Debate about the extent to which beneficial ownership should be disclosed remains a contentious matter, given the competing needs to protect legitimate financial privacy as well as preventing people using structures to hide illicit wealth and evade taxes. 

In a note from Piers Master, partner at London-based law firm Charles Russell Speechlys, he said there are concerns about the registration process set out under the Register of Overseas Entities (Verification and Provision of Information) Regulations 2022. 

“These [regulations] provide that a UK-based agent (such as a legal, trust and/or company service provider) must verify information for an overseas entity before an application is made to Companies House,” Master said. 

“This is an entirely separate exercise to the client due diligence checks that solicitors will be used to and, as such, requires very careful consideration,” Master continued. 

“It is an offence under the Act for a person, without reasonable excuse, to deliver or cause to be delivered any document that is `misleading, false or deceptive in a material particular.’ 

“Law firms would be well advised, therefore, to cautiously assess whether they are in a position to provide verification statements, and to engage third parties to carry out this process where there is any risk of inaccuracies in the information being submitted,” Master said.

“It is hoped that technical guidance from Companies House and the Land Registry will provide some detail on the steps solicitors and other service providers can take to ensure compliance,” Master added.

It has been argued for some time that registers of beneficial ownership aren't a silver bullet against illicit money flows. For example, Jason Sharman, an academic, has challenged the wisdom of using public registers as the best way to proceed. (Here is another interview with the Sharman.)