You need to know the UBO

Four in ten foreign entities that own UK property have failed to register their Ultimate Beneficial Owner to Companies House by the February 6th deadline, and anti-money laundering experts SmartSearch is urging estate agents to take compliance into their own hands.

Six months ago, in response to the increasing problem of corrupt individuals buying UK real estate through foreign entities – the UK Government introduced a new register of Overseas Entities. The register, which requires all foreign entities that own property in the UK to register their Ultimate Beneficial Owner (UBO), was brought in to boost transparency within the property sector by exposing the ownership structures of offshore firms that have bought real estate in the UK.

Estate agents need to take responsibility for identifying UBOs.

However, of the 32,440 foreign firms that own UK property, just 19,510 had registered by the deadline and, with a huge number of sanctions still in place against Russian nationals, as AML experts here at SmartSearch, we’re warning estate agents to remain highly suspicious of any offshore firms trying to buy or sell property in the UK.

While owning UK property through a foreign entity is not illegal, it does allow the UBO to hide not only their identity but also their funds, and this system can – and is – widely abused by criminals and corrupt elites. This is because, anyone who has gained their wealth illegally is able to set up an anonymous shell company, offshore, transfer those ill-gotten gains into it, and then buy a UK property through it with that dirty money.

Register of interests

So, to try and stop this, the UK Government decided to insist that UBOs were declared for all foreign entities that buy UK property, but a huge number have failed to comply. The Government is threatening serious legal and financial action against those that have failed and while that will kick start those with nothing to hide into action, those that are hiding illegal activity will not voluntarily offer that information, leaving the property market highly vulnerable.

SmartSearch welcomes the new register as a vital tool in the fight against money laundering within the UK property market, as it enables estate agents to quickly and easily identify the corporate structure behind those businesses buying UK property and they can then run their due diligence and screening checks to ascertain the risk, if any, that business and UBO poses. But four in ten foreign firms have failed to declare their beneficial owners and while some will be legitimate businesses that have simply missed the deadline, we know from past investigations – like the Panama Papers – that there will be a sizeable number that are refusing to declare because they have something to hide.

At SmartSearch, we’re we warning estate agents and other property firms that due to this mass-scale non-compliance, they will need to take the responsibility of identifying the UBOs of those firms that have not registered, into their own hands. Owning a property through an offshore firm is perfectly legal, but as I explained earlier, the structure enables UBOs to hide both their identities and their funds, making them the perfect vehicle for tax avoidance and money laundering.

Businesses that are legitimately owned and legitimately funded should have no problem in registering and providing their UBO information, meaning that those that don’t must have something to hide. At best, they are hiding immoral activity, at worst, illegal, but whatever it is, it needs to be identified.

UBO checking system

Our system can quickly and accurately identify UBOs using Experian’s Ultimate Beneficial Owner database. We can identify any individuals within the corporate structure with over 10% of the total shares or voting rights, and if any are also directors, we’ll flag that status separately. We also list any other companies in the structure which have a share in the business, meaning you can get the full picture, no matter how complicated the structure of the business is.

Then, once a UBO has been successfully identified, users can then carry out a full AML check on that individual or entity – including sanctions screening and customer due diligence – to make sure they don’t raise any compliance flags.

Government determination

The Government has pledged to come down hard on the foreign entities that have failed to register with Companies House, with Business Minister Lord Callanan warning that there is “nowhere for the criminals and corrupt elites to hide” and that the Government will be “using all the tools at our disposal, including fines and restrictions, to crack down on foreign companies who have not complied”. And while we welcome the fact there are serious consequences for those that have failed to register, it doesn’t help those estate agents that need to check businesses now.

To find out more about how SmartSearch can help you with identifying Ultimate Beneficial Owners, visit www.smartsearch.com