Russians hide information about property in UK despite law
2023.01.31 14:12
Russians hide information about property in UK despite law
By Ray Johnson
Budrigannews.com – After Moscow invaded Ukraine last year, Britain announced new legislation that requires property owners to disclose their ownership in an effort to stop corrupt elites and Russian oligarchs from laundering illicit wealth.
One of the first nations to do so, Britain is requiring foreign companies that own property in the UK to identify their “beneficial owners” in a new public register by Tuesday’s end. However, a Reuters analysis of government data revealed that the people behind thousands of foreign companies that own property in the UK keep their identities a secret.
According to information provided by Companies House, the organization in charge of the new register, as of Tuesday morning in Britain, more than 19,000 foreign businesses had disclosed their ownership of UK property. According to separate land-ownership records maintained by Britain’s Land Registry, that amounts to approximately two thirds of all property-owning foreign businesses.
One-quarter of the more than 19,000 companies that registered with Companies House did not identify any individual owners. Many of these companies disclosed entities in countries with a reputation for business secrecy, such as Panama or the British Virgin Islands. A person or a legal entity, such as a corporation or trustee, is considered to be a beneficial owner according to government guidance.
As of Tuesday morning, only four Russian citizens who were subject to British government sanctions were listed on the register. They included One of Russia’s wealthiest businessmen, Vladimir Potanin; Igor Shuvalov, Russia’s former first deputy prime minister, and his wife; and Alexander Frolov, the former head of the Russian mining and steel company Evraz.
Some sanctioned Russians who have been linked to UK properties, including Roman Abramovich, were not on the register as of Tuesday morning.
The Register of Overseas Entities is a component of a broader economic crime law that the government said would assist in preventing Russian oligarchs from laundering money in UK property. According to then-Prime Minister Boris Johnson, supporters of Russian President Vladimir Putin have “nowhere to hide” in Britain as a result of the legislation.
The difficulties that governments face when attempting to increase transparency in order to stem the flow of illicit funds are made clear by Britain’s experience.
Reuters was unable to determine whether the use of legitimate exemptions, as opposed to property owners’ failure to comply with the rules or other reasons, such as companies being dissolved, contributed to the lack of disclosure. Politicians and other supporters of transparency have criticized the government for allowing wealthy individuals to avoid making disclosures by using trusts, for example.
The business ministry, which is in charge of Companies House, Britain’s public company registry, was contacted for comment by Downing Street.
A spokesperson for the business ministry stated that the new disclosure requirement “is just one tool in the Government’s arsenal to crack down on money laundering by shining a light on the real owners of UK properties.” Companies House is working closely with law enforcement agencies to prepare cases against those who have not complied with the register’s efforts to flush out criminals and their illicit wealth.
Companies that do not provide accurate disclosures run the risk of having their property sales restricted, receiving fines of up to 2,500 pounds per day, and individuals could be imprisoned for up to five years.
Monday, a non-named representative of the British government stated that the level of compliance had been “disappointing.” The official, who is familiar with the government’s implementation efforts, added that discussions were currently taking place within the government to allocate approximately 20 million pounds for increased enforcement.
President of the metals giant Nornickel, also known as Norilsk Nickel, is Potanin. Reuters was informed by the company that a subsidiary holds a long-term lease for office space in London and that Potanin filed the disclosure as Norilsk Nickel’s ultimate beneficial owner.
The new register’s representatives for Shuvalov and Frolov, both based in London, did not respond to requests for comment.
The British capital’s high-end real estate has long attracted Russian and other wealthy foreign buyers, ranging from the stuccoed mansions in London’s embassy district of Belgravia to the glass penthouses along the River Thames.
Illicit funds have been a part of this. An anti-corruption campaign group called Transparency International UK says that since around 2000, 6.7 billion pounds, or about $8.3 billion, of questionable foreign money has been poured into British property. This includes 1.5 billion pounds from Russians who are accused of being corrupt or having ties to the Kremlin.
Jonathan Benton, a former head of the UK’s National Crime Agency’s international corruption unit, stated that in recent decades, London’s luxury property market has resembled “a giant washing machine” for money laundered from overseas.
Benton stated that the new register is a significant step toward transparency, but that the legislation contained “large and quite obvious holes” that enable wealthy, corrupt individuals to conceal their assets.
Among the main exceptions: Only if they own more than 25% of the property-owning foreign company must the beneficial owners register. In addition, the majority of the time, foreign businesses are not required to publicly disclose the beneficial owners if they purchased the property prior to 1999 or hold UK property in a trust. If the beneficial owner is a trustee, the owner of the property is obligated to disclose private information to the government about the trust and its beneficiaries.
A further restriction on disclosure is that people who register do not have to include the address of the property they own.
Since plans to implement the register were announced seven years ago, subsequent British governments have received warnings about potential flaws.
In 2019, a committee of politicians from all parties said that the government should lower the ownership threshold to force more people to declare their property ownership and warned that trusts could be used to circumvent the rules. The committee was informed by the City of London Police that “the process will be fairly pointless” if trusts were excluded.
According to three government officials who spoke with Reuters, exemptions were added so that the reporting requirements wouldn’t be too burdensome. Some examples of these exemptions include major foreign corporations that have small ownership stakes in numerous UK properties.
The British government has described Shuvalov, chairman of the Russian state development bank VEB, as a “core part of Putin’s inner circle,” as one of the dozens of Russian nationals who have submitted information to the register. The new register indicates that Shuvalov and his wife declared ownership of Sova Real Estate, a Moscow-based UK property owner.
According to separate UK land ownership records, Sova Real Estate paid 11.4 million pounds in 2014 for two apartments with a view of the Thames River. Alexei Navalny, a politician in the Russian opposition, made the revelation that Shuvalov owned the properties the year after.
As of early Tuesday, the register did not include any other prominent Russians who were associated with UK property, including those sanctioned by Britain for connections to Putin and his government.
A mansion on Kensington Palace Gardens, one of the most expensive streets in the world, is one of the Abramovich properties. Land-ownership records indicate that the property was purchased by a Cyprus-based company that provided as a contact a UK company that corporate filings show was ultimately controlled by Abramovich. Planning applications for the property have been made in Abramovich’s name. According to filings, Abramovich gave control of the ultimate parent company to an associate last year.
As of Tuesday morning, the Cyprus-based company A. Corp Trustee Limited was not included in Britain’s brand-new property register. Independently, Reuters was unable to determine whether Abramovich currently owns British real estate.
Alisher Usmanov, a billionaire businessman, and Oleg Deripaska, an aluminum tycoon, were two additional Russian oligarchs whose names were also not on the new register as of early Tuesday. Britain has previously claimed that their names are owners of millions of pounds worth of UK properties.
When it announced sanctions against Usmanov in March of last year, the British government stated that among his properties was Beechwood House, which is located in London’s leafy Highgate neighborhood.
According to land ownership records, Isle of Man-based Hanley Limited paid 48 million pounds for Beechwood House in 2008. Hanley Limited’s beneficial owner is listed as Pomerol Capital Sa, a Swiss company, in the UK’s new property register.
The Russian businessman’s spokesperson stated: The properties that you have listed are not owned by Mr. Usmanov. It is best to ask the person in charge of the questions. Requests for clarification were not received from Pomerol Capital. Independently, Reuters was unable to determine whether Usmanov currently owns any British property.
In 2007 documents filed with the London High Court, Deripaska was identified as the beneficial owner of a Belgrave Square mansion. According to land ownership records, the house was purchased in 2003 by the British Virgin Islands-based Ravellot Limited. Additionally, Ravellot was not listed on the new property register.
Deripaska’s spokesperson did not respond to requests for comment. In a statement released in March 2022, a spokesperson stated that the house does not belong to the businessman personally but rather to members of his family.
Margaret Hodge, a member of the opposition Labour Party who has focused on fighting corruption, stated that the findings of Reuters demonstrate that the government has failed to prevent President Putin’s supporters from “concealing their assets” in Britain.
