MPs criticise anti-money laundering bill as unenforceable

Michael Lloyd

May 21, 2019

MPs and peers have criticised a bill aimed at cracking down on money laundering within property as “unenforceable” and having “too many loopholes”.

In 2017, 160 properties worth more than £4bn were identified as having been purchased by “high corruption-risk individuals” but inquiries into this type of corruption are often hampered because enforcement agencies cannot access information about anonymous foreign owner.

When reviewing the Draft Registration of Overseas Entities Bill the committee – chaired by Lord Faulks – expressed concerns that this issue will not be dealt with by the Bill as it stands.

Lord Faulks QC said: “We welcome this much-needed legislation as one of the vital tools required to create a hostile environment for money launderers who want to use the UK property market to hide unlawful funds.

“The legislation is well drafted, but there are still some loopholes in the draft Bill which, if unaddressed, could jeopardise the effectiveness of this important piece of legislation. In the current political climate, anti-money laundering may not seem an immediate priority.

“But the evidence we took shows there’s a huge problem, and it’s not going away. Time is of the essence: the government must get on with improving this Bill and making it law.”

They also expressed concern that the proposed legislation does not cover trusts or address the lack of verification checks to prevent criminals from submitting false information.

Martin Cheek, managing director at anti-money laundering firm SmartSearch, said: “I agree with the joint select committee that there are issues with this legislation that need to be addressed, and I think there are two main issues.

“The first is in trying to clear up those properties in the UK that have already been purchased using the proceeds of crime and/or corrupt politicians; the unexplained wealth orders are an attempt to address these, but it will be a very slow process.

“The second issue is ensuring the UK has a robust system in place for foreign purchases of high-value property. And whilst other countries, including the Crown Dependencies (such as the Cayman Islands) allow opaque ownership, the process will never be 100% watertight.

“Money laundering is a huge problem, and with this legislation, the government is attempting to make the UK a hostile environment for money laundering which is to be applauded.

“But, as Lord Faulks, chair of the joint committee so rightly points out, it is not there yet, and if we want this legislation to be a true deterrent, these issues must be addressed before it is made law.”

It has been more than three years since the government pledged to introduce a transparent register of the foreign entities that own UK property, and of the individuals who actually control them.

The Serious Fraud Office has recently pledged to speed up investigations into fraud and corruption.

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