New law will leave Russian property owners with “nowhere to hide”

New law will leave Russian property owners with “nowhere to hide”

Foreign owners of UK property will be forced to declare their identities rather than hiding the true ownership of the property behind the façade of a shell company, Prime Minister Boris Johnson announced on Monday.

This is the latest government move against Russia following their invasion of Ukraine. It is designed to tackle the Russian “dirty money” being laundered by foreign oligarchs through the UK’s property market.

This comes as the Solicitors Regulations Authority (SRA), Council for Licensed Conveyancers (CLC) and Financial Conduct Authority (FCA) have all issued guidance for solicitors insofar as dealing with Russian entities in light of the current sanctions.

With restrictions on Russian ownership of property and economic activity within the UK, the CLC said to solicitors:

Ensure you have the right processes, systems and controls in place… to comply with any sanctions developments to avoid the risks [of criminal prosecution or a large public fine].”

The Economic Crime (Transparency and Enforcement Bill) will create a register upon which all foreign owners of UK property must declare their true beneficial ownership and verify their identity with Companies House. Those who do not declare their beneficial owner will be subject to restrictions on the sale of property and may face up to five years in prison.

This may make it easier for solicitors to know who they are dealing with when conducting transactions and anti-money laundering (AML) checks, thus helping them to comply with the sanctions and their responsibilities, and to avoid the aforementioned risks.

The Bill will be brought to parliament this week and fast-tracked through the legislature.

Mr Johnson said:

There is no place for dirty money in the UK. We are going faster and harder to tear back the façade that those supporting Putin’s campaign of destruction have been hiding behind for so long.

Those backing Putin have been put on notice: there will be nowhere to hide your ill-gotten gains.”

A Law Society spokesperson commented:

The Law Society strongly welcomes the introduction of the Economic Crime Bill.

Solicitors play an important role in tackling money laundering and we look forward to working with the government to ensure that the reforms the Bill introduces are effective and help make the UK a hostile place for money launderers.”

It is believed that over £1.5 billion of UK property has been purchased in the last six years by those with ties to the Kremlin or Russians accused of corruption, according to Transparency International. The latest data from the Land Registry shows that the number of UK property owners purchased by those with a Russian correspondence address has increased by 1,200% in the last 12 years.

These changes come following countless calls to strengthen the offensive on Russian oligarchs and their investments in the UK. On Thursday, Michael Gove, Secretary of State for Levelling Up, Housing and Communities, told a cabinet meeting that the government should seize all London property owned by such oligarchs, as reported by The Sunday Times.

Sadiq Khan, Mayor of London, echoed this sentiment, accusing Russian money launderers of using the London property market as their “playground”, accusing ministers of “turning a blind eye” to such activity.

Shadow Home Secretary Yvette Cooper said that the new rules were “welcome”, but “do not yet go far and fast enough”. It is thought that the register could take up to a year to be operational. Cooper added that:

For too long, the City of London and the UK economy has been used as a laundromat by corrupt elites linked to organised crime.”

Alongside the introduction of the register, there will also be a new “kleptocracy” cell based in the National Crime Agency which will tackle sanctions evasion.

The legislation will also reform Unexplained Wealth Orders (UWOs). These aim to address criminal money invested into property yet, according to the BBC, have been used only four times since their introduction, and just one has resulted in property being surrendered. This legislation will strengthen this tool and help “crack down on economic crime”, according to Home Secretary Priti Patel, who added: “Time is up for Putin’s cronies.”

 

Jamie Lennox, Editor, Today's Conveyancer

Editor of Today's Conveyancer, Today's Wills and Probate, and Today's Family Lawyer Contact LinkedIn Twitter Email

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