16 March 2016

Identifying the beneficial owners of foreign companies

The UK government has published outline proposals aimed at achieving transparency of the beneficial owners and controllers of foreign companies that invest in real estate or participate in public contracting in the UK. The proposals form part of the UK government's efforts to tackle money laundering and terrorist financing, which include new rules requiring UK companies to disclose their "people with significant control" from 6 April.

The government has singled out real estate because of its perceived exposure to criminal activities such as money laundering. There are similar concerns with public procurement, but here the government is also keen to provide a level playing field between bidders for public contracts once the new transparency regime is in place for UK companies.

If the proposals go ahead, foreign companies that invest in land in England & Wales would have to identify their beneficial owners and controllers on a public register, similar to the new PSC register for UK companies. There would be exemptions where this information is already publicly available (for example, as a result of the EU's Fourth Money Laundering Directive, which mandates disclosure regimes for the beneficial owners of corporate entities across the EU by June 2017).

The government is considering similar registration requirements for foreign companies that bid for public contracts in England, but here it is also open to some other options. These could include requiring foreign company bidders to disclose their beneficial owners to the contracting authority directly, without needing pre-registration.

The government is also seeking views on enforcing any new requirements. This could include fines for non-compliance and/or restrictions on buying or selling properties, or participating in public contracting, or sanctions linked to the company's other economic activities in the UK.

The proposals are currently at the discussion stage only, and any more concrete proposals would require a formal consultation process. The focus is on real estate and public procurement at present, but the government says it may identify other areas in the future.

The government has asked for responses by 1 April, so those interested are encouraged to make their views known as soon as possible.

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