Oligarchs or kleptocrats who try to sell off property in order to avoid it being listed in a new public register may be forced to declare their details upon sale, a minister has said, as MPs vowed to toughen up a new bill targeting hidden wealth.
Ministers have promised sweeping changes to toughen up the economic crime bill, which was rushed through the House of Commons on Monday, as MPs also demanded the closing of loopholes allowing the false reporting of assets.
MPs also expressed significant concern about the enforcement of the new requirements, as well as new sanctions and the low budget for implementation compared with countries such as the US.
The economic crime bill, fast-tracked through the Commons in a single day in response to Vladimir Putin’s war in Ukraine, had been repeatedly delayed prior to the invasion. It targets those who hide wealth in the UK, particularly through property purchases. These include criminals and those – such as Russian oligarchs – who might be seeking to shelter illicitly acquired money.
The bill will reform Companies House in an attempt to verify the identity of every company director and beneficial owner, with the aim of preventing all criminals or kleptocrats from hiding behind a UK shell company.
MPs had expressed particular concern that existing owners will have up to six months to register their ownership, which could allow people to dispose of or transfer illicit assets. The bill initially put this grace period at 18 months, but a government amendment will reduce it to six. Labour has called for it to be cut to 28 days.
But business minister Paul Scully said the government was minded to go further before the bill reached the House of Lords. “I’m really aware of the strength of feeling that corrupt people must not be allowed to escape the transparency that this register will bring,” he said.
“I can therefore see merit in requiring all those selling property to submit a declaration of their details at the point of the transfer of land title during that transition period. And that would mean that for anyone selling, we would be giving them a zero-day transition period.”
Ministers have also been asked to scrap the defence that owners did not commit an offence if they claim not to realise they have provided false information, as it must be given “knowingly or recklessly”.
Scully also signalled he would address a clause that foreign owners can get an exemption if the secretary of state deems it is in “the interests of the economic wellbeing of the United Kingdom”.
Introducing the bill, Priti Patel, the home secretary, said the government was “determined to root out the dirty money in our economy, and importantly, to hobble Putin and his cronies”. She said a second version of the bill would come later, including powers to prevent the abuse of limited partnerships, new powers to seize crypto assets from criminals, and measures to help businesses share information on suspected money laundering.
The former cabinet minister David Davis said it was not a “perfectly crafted bill” and that it had initially been designed for a different purpose. “We’re dealing with a difficult but sophisticated adversary, and we’re making decisions quickly,” he added. It was now an “economic warfare bill – a war that liberal democracies cannot afford to lose”.
Kevin Hollinrake, one of the Tory MPs who has led calls to toughen up the bill, said MPs were keen to close loopholes that would allow people to subvert the legislation. “If you are a kleptocrat oligarch and you own a £20m house in Belgravia, you have probably shifted it to somebody else already, and I think the most important thing for me is we have very timely introduction of these measures,” he told the Guardian.
“For me there has to be a requirement for a transfer or sale of any asset in the UK owned by an overseas entity to have to disclose the beneficial owner before that is transferred or sold. That has to be immediate.”
Tom Keatinge, director at the Centre for Financial Crime and Security Studies at the Royal United Services Institute, told the Treasury select committee that it had “not had the resources” to tackle economic crime. He said the UK had “suffered from a fear of being financially outgunned in court by oligarchs”.
He added: “There is no one person who lives and dies on how the UK performs on addressing illicit finance. It’s fragmented across government. That is what I mean by the lack of leadership.”
