In advance of the recent international anti-corruption summit in London, substantial amounts of press coverage were devoted to David Cameron’s faux pas in referring to some of the “fantastically corrupt” countries in attendance. Significantly less publicity was given to the Prime Minister’s announcements at the summit itself, including one which has potentially wide reaching implications for those who use corporate vehicles to own and purchase property in the UK.
The government recently announced that the UK was to be the first G20 country to implement a publicly accessible register of beneficial owners of companies and other corporate entities – beneficial owners being the individuals who ultimately sit behind often complex corporate structures and enjoy the benefit of assets owned by the company. At the summit the Prime Minister went further by announcing that offshore shell companies and other foreign corporate entities that buy or own British property will similarly be obliged to declare their beneficial ownership. The proposal may go some way in addressing concerns that some high-value properties, particularly in London, are being purchased with ill-gotten funds to facilitate money laundering. It is intended that the transparency obligations will extend to companies and other entities which currently own UK property, not just those that purchase in future, such that the ownership details of tens of thousands of people will soon become public. The government is also consulting on reversing the burden of proof, such that if there are suspicions of UK property being purchased with illicit funds, it will be incumbent upon the owner to demonstrate that the property was purchased with legitimate funds or risk being stripped of the property.
The Prime Minister has announced that a handful of other countries will make the same commitment and presumably hopes that others will follow suit. However, he has already faced criticism of his inability to persuade British dependencies, including the Cayman and British Virgin Islands to sign up to the transparency scheme. Critics have voiced concerns that these and other territories already have robust anti-corruption practices, albeit even if information is not made publicly available, and that a move to make such information more transparent risks driving legitimate business activity into non-compliant and less well-regulated jurisdictions. The property market is already showing signs of slowing in London and it is feared that the anti-corruption rules risk further driving down demand from legitimate business persons, who may have their own reasons for privacy. Others argue that, conversely, the rules will enhance demand by creating a perception of the UK property market as a safe and clean place to do business.
It remains to be seen how far reaching the anti-corruption practices will ultimately be and what impact, if any, they will have on the market.
