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Following Moscow's invasion of Ukraine last year, Britain announced new regulations demanding the disclosure of property ownership in an effort to stop Russian oligarchs and other corrupt elites from laundering illicit funds.
Britain was one of the first countries to require foreign corporations holding UK property to disclose their "beneficial owners" in a new public register by the end of Tuesday. However, a Reuters study of government data revealed that the owners of more than ten thousand foreign firms that own property in the UK are still hidden from the public eye.
Data from Companies House, which manages the new register, shows that as of Wednesday morning in Britain, more than 19,700 foreign companies had reported ownership of UK property. According to the government, this accounts for almost two thirds of all foreign corporations that hold property.
According to Reuters, 5,500 businesses, or nearly 30% of the more than 19,700 businesses that did register with Companies House, failed to name any individual owners. A large portion of those listed as beneficial owners are companies from nations with a reputation for business secrecy, like the British Virgin Islands or Panama. According to government regulations, a beneficial owner might be either a person or an organization, like a corporation or trustee.
As of Wednesday morning, there were just four Russian people included on the register who were subject to British government penalties. They included Alexander Frolov, the former CEO of the Russian steel and mining corporation Evraz, Vladimir Potanin, one of Russia's richest businessmen, Igor Shuvalov, a former first deputy prime minister, and his wife.
Some sanctioned Russians, notably Roman Abramovich, who have been connected to UK properties were not listed on the register as of Wednesday morning.
The Register of Overseas Entities is a component of a larger economic crime law that was passed last year, according to the government, in an effort to stop Russian oligarchs from using UK real estate to launder money. According to then-Prime Minister Boris Johnson, the measure gives supporters of Russian President Vladimir Putin "nowhere to hide" in Britain.
The difficulties facing governments attempting to promote transparency in an effort to stop the flow of illicit funds are highlighted by the British experience.
Reuters was unable to determine the extent to which the lack of disclosure was caused by the use of legal exemptions as opposed to property owners' violations of the laws or other factors, such as companies being liquidated. Advocates for transparency, politicians, and others have criticized the government for creating openings that permit wealthy people to avoid disclosing their financial information, such as by using trusts.
The business ministry, which is in charge of Companies House, the country's public registry of companies, was contacted when Downing Street requested comments.
On Wednesday, the business ministry announced that it has set aside 20 million pounds to help fight money laundering through businesses. Martin Callanan, the business minister, said in a statement that "we will be using all the tools at our disposal, including fines and restrictions, to crack down on foreign companies who have not complied." The authorities said that approximately 7,000 foreign firms had failed to comply.
Companies who fail to provide appropriate disclosures may be prohibited from selling their assets, subject to fines of up to 2,500 pounds per day, and risk up to five years in prison.
The amount of compliance had been "disappointing," according to a British government official who requested anonymity.
Requests for comment from an Abramovich spokesperson went unanswered.
President of Nornickel, often known as Norilsk Nickel, is Potanin. The business disclosed to Reuters that Potanin submitted the report as the ultimate beneficial owner of Norilsk Nickel and that a subsidiary maintains a long-term contract for office space in London.
Shuvalov and Frolov's London-based representatives named on the new register did not reply to inquiries for comment.
Russian and other affluent international purchasers have long been drawn to the luxury real estate in the British capital, which ranges from the stuccoed palaces of London's Belgravia embassy neighborhood to the glass penthouses along the River Thames.
Included in that are unlawful funds. An anti-corruption organization in the UK, Transparency International UK, calculates that since around 2000, 6.7 billion pounds, or about $8.3 billion, of shady foreign funds have flowed into British real estate, including 1.5 billion pounds from Russians suspected of corruption or having ties to the Kremlin.
In recent years, the market for luxury real estate in London has resembled "a giant washing machine" for money that has been laundered abroad, according to Jonathan Benton, a former head of the National Crime Agency's international corruption unit in the UK.
The new register, according to Benton, is a significant step toward greater transparency, but the law has "large and quite obvious holes" that allow corrupt, wealthy figures to conceal their assets.
Beneficial owners are only needed to register if they possess more than 25% of the foreign corporation that owns the property, among other significant exemptions. Additionally, in the majority of cases, foreign businesses that acquired the property prior to 1999 or that hold UK property in a trust are exempt from disclosing the true owners to the public. The property holder is required to inform the government about the trust and those associated with it when the beneficial owner is a trustee, even when the information is kept confidential.
Another restriction on disclosure is that persons registering are exempt from including the address of the property they own.
Since proposals to implement the register were first proposed seven years ago, successive British governments have been warned about potential shortcomings.
A cross-party committee of legislators recommended that the government decrease the ownership threshold in order to make more people report the property they own in 2019. The group also cautioned against the dangers of using trusts to circumvent the law. If trusts were excluded, the City of London Police warned the committee, "the process will be fairly pointless."
According to three government officials who spoke to Reuters, exclusions were added to prevent the reporting requirements from becoming too onerous, such as for large foreign corporations that own small percentages of numerous different UK properties.
Shuvalov, the head of the Russian state development bank VEB, who the British government has referred to as "a core part of Putin's inner circle," is one of the many Russian citizens who have provided information to the register. Shuvalov and his wife disclosed ownership of a Moscow-based company called Sova Real Estate that owns property in the UK, according to the new register.
Separate UK land ownership documents reveal that Sova Real Estate paid 11.4 million pounds in 2014 for two flats with a view of the River Thames. The properties' ownership was made public by Russian opposition politician Alexei Navalny the following year.
As of Wednesday morning, several high-profile Russians who have been linked to UK real estate were absent from the registry, including individuals who were subject to British sanctions because of ties to Putin and his government.
A mansion on Kensington Palace Gardens, one of the most expensive streets in the world, is one property connected to Abramovich. Land ownership records show the property was purchased by a Cyprus-based company that listed a UK company that corporate filings reveal was ultimately controlled by Abramovich as a contact. Planning applications have been submitted for the property under the Abramovich name. According to filings, Abramovich gave control of the ultimate parent firm to an associate last year.
As of early Wednesday, the Cyprus-based company A. Corp Trustee Limited was not found on the new property register in Britain. Whether Abramovich now owns property in Britain could not be independently verified by Reuters.
The names of billionaire businessman Alisher Usmanov and aluminium tycoon Oleg Deripaska, two other Russian billionaires who Britain has previously said are owners of millions of pounds' worth of UK properties, were also absent from the new register as of early Wednesday.
Beechwood House in London's lush Highgate neighborhood is one of Usmanov's properties, the British government claimed in March of last year when it issued sanctions against him.
According to land ownership records, Hanley Limited, a company based on the Isle of Man, bought Beechwood House in 2008 for 48 million pounds. Hanley Limited's beneficial owner is listed as Pomerol Capital Sa, a Swiss corporation, on the UK's new property registry.
The Russian entrepreneur's spokesman stated: "Mr. Usmanov does not own the properties listed by you. The questions should be addressed to their owner." Requests for response from Pomerol Capital went unanswered. Whether or not Usmanov now owns any property in Britain could not be reliably verified by Reuters.
In records from the London High Court, Deripaska was named as the beneficial owner of a property in Belgrave Square in 2007. Land ownership documents reveal that the British Virgin Islands-based Ravellot Limited bought the home in 2003. Also absent from the new property registration was Ravellot.
Requests for comment from a Deripaska spokesperson went unanswered. According to a spokesperson's statement from March 2022, the home actually belongs to the businessman's family rather than to him directly.
According to Margaret Hodge, a Labour Party lawmaker who has concentrated on anti-corruption, the government has failed to prevent President Putin's supporters from "concealing their assets" in Britain.
By fLEXI tEAM