Companies House says the Register of Overseas Entities (ROE), launched last August, has already had a significant impact. However, ICAEW has warned that concerns with specific implications for ICAEW members remain.

A blog post authored by Sara Williams, the register’s Implementation Lead, says just over 29,000 overseas entities are now registered, boasting a compliance rate of around 90%, and more than 700 update statements have been filed since that service was launched on 2 August 2023. Meanwhile, the data on the register has been accessed nearly 1 million times.

The register forms an important part of the government’s strategy to tackle global economic crime and strengthen the UK’s reputation as a place where legitimate businesses can thrive. It requires overseas entities that own UK property or land to declare their beneficial owners or managing officers. Overseas entities cannot buy, sell, transfer, lease or raise a charge against land in the UK unless they’ve registered with Companies House.

All entities on the register must file an update statement every year, even if nothing has changed, to confirm that the information held is correct and up to date, unless they’ve successfully applied to be removed from the register. It’s a criminal offence not to file the update statement, and entities may face prosecution or a financial penalty if they do not file. Overseas Entity IDs will become invalid if an entity does not file the update statement on time. 

Enforcement action taken against entities that have failed to register or file an update statement to encourage an even higher compliance rate is well underway, the blog post says. Sanctions at the disposal of Companies House include warning notices and penalties of between £10,000 and £50,000 per property. At the same time, overseas entities that have not registered with Companies House already face restrictions on selling, transferring, leasing or raising charges against their property or land. Overseas entities also cannot buy any new UK property or land without an Overseas Entity ID. 

However, issues surrounding verification remain a concern, bearing in mind that a critical element of the ROE regime is the requirement to independently verify elements such as the exercise of control. ICAEW has already voiced concern that, as it currently stands, a firm could be liable to prosecution if it verifies documents that turn out to be false, even though there is no malicious intent. 

A note from the Accountancy AML Supervisors’ Group (AASG) agreed that the drafting of the Verification Regulations means there is a strict liability in place, and it is concerned that any firm acting as a verifier could expose itself to significant risk including possible criminal prosecution, regulatory sanction and reputational damage. 

“Firms should carefully consider whether they should provide this verification work. The work required for verification under the ROE is not the same as the risk-based approach to client due diligence under MLR17 and firms should familiarise themselves with the differences,” the AASG warns. 

ICAEW has suggested that aligning the legislation with the requirements of the Money Laundering Regulations, or making the guidance of the Department for Business, Energy and Industrial Strategy statutory, could address verification concerns. Mike Miller, Economic Crime Manager at ICAEW, said ICAEW strongly supports implementation of measures to boost transparency and reduce the attractiveness of the UK for the facilitation of economic crime, including Companies House reforms and the implementation of the ROE. 

“Increasing the accuracy and availability of information is crucial,” he says. “However, we remain concerned about the potential liabilities for companies registering as Authorised Corporate Service Providers to offer verification services due to the challenges of operating in various overseas jurisdictions. We will continue to work with Companies House to promote the continued implementation of reforms in a practical and achievable manner and welcome their intention to further consult on further measures. “

Wider concerns have also been expressed about hidden identities of the Ultimate Beneficial Owners of trusts. A report published last month by the University of Warwick on the day Parliament returned to debate the Economic Crime Bill finds that for 35% of properties owned via overseas shell companies (54,000 out of 152,000), even law enforcement agencies do not know the true identities of the properties’ beneficial owners. In 10% of cases (15,000 properties), the company is missing from the register altogether, and in a further 25% (39,000 properties) essential information has not been reported.

The biggest reason for missing or inaccessible information on beneficial owners is the use of trusts, which account for an astonishing 63% of all properties where beneficial owners are hidden from the public (69,000 out of 108,000). An amendment to the Economic Crime Bill proposed by Lord Agnew would shut this loophole but is being opposed by the government.

Companies House says new secondary legislation in the pipeline will set out which third parties can apply for information about trusts and under what circumstances, in a move towards making trust information more transparent. The government has also committed to publishing a consultation by the end of this year to invite people to share and discuss concerns about trustees of trusts who are registrable beneficial owners.