Register of Overseas Entities (Protection and Trusts) (Amendment) Regulations 2025

Debate between Lord Vaux of Harrowden and Lord Fox

Monday 3rd February 2025 Grand Committee

[Lord Vaux of Harrowden (CB)]

My Lords, I welcome the noble Baroness to her post, as it is the first time I have been across the table from her. She was not here when we were debating the two economic crime Bills, but I am sure she is aware that the subject of the use of trusts to obscure the beneficial ownership of UK property on the ROE and obscure ownership of UK companies, which this instrument does not cover, was one of the major areas of our debates at the time.

These regulations are a small step to improve transparency around the use of trusts to own UK property. I understand the balance around the protection of minors and others at risk, so I welcome the regulations, but slightly question how much difference they will make in practice. At least the progress is in the right direction.

I will ask a couple of questions about some general, related areas, if I may. I could not resist this opportunity. First, the latest information that I could find indicates that the true identity of the beneficial owner of UK properties owned by overseas entities—there are 152,000-odd—is not published in about 70% of cases, at the moment. For about 35% of cases, the true beneficial ownership is not known even to law enforcement agencies. There may be a number of reasons for that, including simple non-compliance, which accounts for about 10% in the last numbers I saw; the use of opaque corporate structures, which claim no beneficial ownership, or the use of nominees; and the use of trusts, which is the biggest one, particularly in our overseas territories. Transparency International’s latest numbers identify about £6 billion worth of suspicious transactions in UK property coming through our overseas territories, using trusts.

Could the noble Baroness provide up-to-date statistics on both level of compliance with the rules and the number of properties where the ultimate beneficial ownership remains unknown, for whatever reason? I am happy for her to write, if necessary, if she does not have the numbers to hand. Is she happy with the level of identification of beneficial ownership as it stands? What impact does she think these regulations will have on that? What further steps are planned to make sure that we know who beneficially owns the properties? In particular, what plans does she have to make the information from our overseas territories more transparent? The British Virgin Islands, in particular, appear to be the jurisdiction of choice for obscuring beneficial ownership, at the moment.

Of those entities that have not complied—10% was the number that I saw, which is about 15,000 entities—how many have been fined? Of those, how many have paid those fines and gone on to comply subsequent to payment? How many charges have been taken against the properties in relation to non-payment of the fines? In other words, does Companies House have sufficient powers to deal with non-compliance, and is it using those powers effectively?

Secondly—and I hope that the noble Baroness will forgive me for going slightly off-piste—another way to hide beneficial ownership is through the use of nominee shareholders. I notice the noble Lord, Lord Fox, smiling; I hate to be predictable, but there we go. This is particularly true for UK companies, where the persons with significant control or PSC rules can be sidestepped by the use of nominees. An entire industry has built up around that. The previous Government accepted that there was an issue around the use of nominees for this purpose and agreed to include a power in the Economic Crime and Corporate Transparency Act 2023 to take further action against the use of nominee shareholders and the industry that supports them, if they felt it was necessary. This is now Section 790IA of the Companies Act 2006. I want to take this opportunity to ask what assessment this Government have made of the use of nominees in that respect and whether they intend to make use of the powers they have under the Companies Act to address it.

[Lord Fox (LD)]

When the discussions were had with the noble Baroness about her becoming a Peer, I wonder whether they mentioned that she would be in the Moses Room presenting statutory instruments. I bet they did not. But I welcome her, and thank her for the clear explanation as well as the Explanatory Notes, which worked very well. To some extent, the Minister is at a disadvantage—or perhaps it is an advantage—in that the three speakers in this debate are the old gang getting together. We were all involved very extensively in both this and the predecessor Bill that came though.

--- Later in debate ---

[Baroness Gustafsson (Lab)]

I think that you talk to the problem at hand, which is how you balance off disclosure from harm. There will often be legitimate reasons for wanting to access this information, but there are also legitimate reasons why you would not want someone to have that information. I do not think that this is a policy where you can describe a single selection, or parameters, that will defend both sides, which is the exact reason for this process, I believe.

The applicant who requires the information has to give full and detailed information as to their identity and why they would need the information, and the individual whose details are being disclosed has the opportunity to write and say that this is information that could cause them harm were it to be disclosed—and proactively make that statement, so that the registrar has the ability to protect those interests. Then it is the registrar’s role to take that information and ensure that they are getting that balance right. They have the information about the applicant, and they can make that judgment based on whether something is a legitimate interest and this is not a bulk access—someone trying to get the full list of all the trustees so that they can sell their local accountancy advice, or whatever that motivation is. On the other hand, they also have the register for people who believe that interest would be detrimental to their personal ability. Their role is to balance the two, providing that transparency but also protecting them from harm.

[Lord Fox (LD)]

I am sorry to labour the point, but the way in which it is being depicted is as if people will accept the registrar’s ruling and say, “Oh, yeah, right, I understand why you’re not letting me do this”, or, “I understand why you’re letting this person look at my identity”. It seems to me that human nature will operate in exactly the opposite direction and that there will quickly be a huge backlog of people who do not agree with the registrar’s decision, one way or the other. There does not seem to be a defined appeal process. If it is all getting lumped into judicial review, we all know how long that takes and what it leads to—and if there is no system and it all ends at the registrar, there is huge pressure on the registrar to be right every time, which will be extraordinarily difficult. While I can understand how it is being described, my sense is that it will be a lot messier than that.

[Lord Vaux of Harrowden (CB)]

Just to add to that, I cannot see anywhere in the regulation where the registrar has to inform the subject of the application that an application is being made. I can see that they can, but I do not see that they have to.