Hot on the heels of the new PSC regime, which requires all UK unlisted companies to keep a register of people with significant influence or control over them, the Government has announced a consultation on proposals for similar transparency arrangements regarding foreign companies active in the UK.
Why act now?
According to the discussion paper issued by the Department for Business, Innovation and Skills, organised crime costs the UK at least £24 billion each year. Criminals often use companies to hide the proceeds of their illicit activities and deliberately obscure the real ownership of assets and controllers of businesses.
The new consultation is part of a range of measures being considered to improve transparency around the owners and controllers of foreign companies which carry on certain activities in the UK. Whilst acknowledging that the vast majority of foreign companies operating in the UK do so lawfully, the Government wants to tackle the “small number of exceptions”.
What activities would be affected?
The proposals in the discussion paper are aimed at two key areas:
- Land ownership: land or property is a convenient vehicle for hiding the proceeds of crime. In particular, as the discussion paper notes, the high value of property in London enables significant sums to be laundered in a single transaction. The paper also suggests that criminals may be attracted by the kudos and “badge of …respectability” that UK property ownership can bring. Of the £180 million worth of UK property investigated by law enforcement in the 10 years to 2014, over 75% used offshore corporate structures.
- Public procurement: given the sums involved in public procurement in the UK (£242 billion in 2013/14) it is believed that increased transparency on beneficial ownership of foreign companies involved in this area will prevent money being laundered through public contracts as well as ensuring that legitimate businesses are treated fairly and that the Government gets value for money.
Although these are the only economic activities affected by the current proposals, the Government has not ruled out identifying further areas for action in the future.
What are the proposals?
The discussion paper suggests that foreign companies would be required to provide information on their beneficial ownership before they were able to:
- buy land or property in England or Wales; or
- enter into public procurement contracts in England.
A number of options for collecting, recording and maintaining information, and what that information should be, are considered in the paper but the Government’s starting position is that foreign companies should be subject to the same obligations imposed on UK companies by the new PSC regime. Whether that information should be publicly available, or available only to public authorities and law enforcement, is also being considered.
The consultation closed last month and the Government’s response is awaited. But with the effects of scandals such as the Panama Papers still reverberating around the world, this hot topic of transparency seems here to stay.