The UK government has failed to enforce fines of around £1bn to foreign firms that have so far not complied with the landmark Economic Crime (Transparency and Enforcement) Act by declaring their owners, according to a report by the BBC.
The Register of Overseas Entities came into force on 1 August 2022 and requires overseas entities who want to buy, sell or transfer property or land in the UK to register with Companies House and declare their beneficial owners or managing officers.
The register was introduced following Russia’s invasion of Ukraine and forms a key part of the government’s strategy to tackle global economic crime. Ministers hope the register will reveal who ultimately owns property in the UK and stop foreign criminals from using UK real estate to launder money.
Entities that fail to register will face criminal and civil sanctions and will be unable to deal freely with their land due to the restrictions placed over it. Failure to submit the relevant information can also result in fines of up to £2,500 a day for non-compliant companies.
Overseas entities who already owned property, or land in the UK before the Act came into effect, were given a six-month window to comply, which meant they needed to record the relevant information by 31 January 2023.
However, although more than 27,000 overseas entities had submitted the relevant information to the Register by 25 May 2023, about 5,000 firms with property in England and Wales have still to do so, but no fines have yet been issued.
The government suggests the figure is likely to be lower, as some companies may no longer exist, and several hundred have already transferred their property.
But even if there were just 4,000 firms that are not complying with the law, the total value in fines would add up to £10m per day if the maximum daily financial penalty was imposed on every company that has not supplied its information, says the BBC.
Over the entire period since the deadline, more than 100 days, this would add up to around £1bn.
A spokesperson for the Department for Business and Trade said it is now assessing and preparing cases for enforcement action. It is expected that further regulations under the Economic Crime and Corporate Transparency Bill, which has just completed scrutiny in the House of Commons, will also empower Companies House to impose financial penalties on land owned by non-compliant organisations, as well as pursue other legal avenues.
Business Minister Lord Callanan said: “There is nowhere for the criminals and corrupt elites to hide. We will be using all the tools at our disposal, including fines and restrictions, to crack down on foreign companies who have not complied.”
Louise Smyth, Chief Executive Officer of Companies House, said: “The implementation of the Register of Overseas Entities has been another huge step forward in the transformation of Companies House and our role in helping combat economic crime.
“We cannot be clearer in our message to these entities; if you ignored warnings and fail to register before the deadline, you will face consequences. This includes not only the prospect of restrictions on your land or property but also a possible fine, prison sentence, or both.”
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