The Joint Committee on the Draft Registration of Overseas Entities Bill has criticised the draft legislation. It notes it is now 3 years since the proposals were announced, with increasing public concern and calls from the SFO to speed up responses to fraud and corruption. The Committee hopes the proposed Register will help enforcement agencies but says time is of the essence. It calls for the new legislation to be implemented with MLD5 – and that both pieces of law should be introduced as soon as possible. But it has several concerns with the current proposals.
It notes it will be hard to assess the effectiveness of the Register but expects the Government to consider this annually.
Specific comments include:
- the importance of defining carefully what is caught by the Bill to be sure to catch all entities which is is supposed to, and to consider how to include individuals where relevant;
- it is not appropriate to delegate to land registries the task of deciding on the legal personality of an entity – this is a task much better suited to Companies House;
- the Government should be responsible for producing guidance on interpretation of key terms;
- there should be a pre-clearance mechanism that would determine in advance of registration whether entities are in fact registrable;
- entities must be able to register their beneficial ownership information as quickly as possible – so Companies House must be resourced to deal with this;
- the Government needs to consider cases where it is appropriate to require information to be provided but may not be appropriate that it be published;
- a suggestion that the affirmative resolution procedure be used if the Government intends to exempt certain entities using a procedure which should be clearly set out in the legislation;
- a concern as to what is “equivalent” as a Register – and suggesting that a fundamental requirement should be for the Register to be public;
- it is critical that the Government addresses how it will ensure that trusts cannot be used as loopholes to circumvent the requirement to register – it has suggested it will do so through the HMRC Trust Registration Service as part of MLD5 implementation and the Committee seeks confirmation that this will be so regardless of Brexit. The Committee also says much work remains to be done in ensuring the right information is obtained from discretionary trusts and overseas trusts with assets that include UK land. It also says the TRS should be publicly available;
- it is critical that trusts are not allowed to slip into any gap between MLD5 and the Bill. There should at least be statutory guidance. Yet trusts should not have to register twice;
- the Government should seriously consider lowering the 25% ownership and voting rights threshold;
- the definition of “beneficial ownership” will be crucial but there is currently no exact definition of “significant influence or control” (and this problem exists under the PSC regime too);
- the powers to restrict the publication of information should be used transparently and properly;
- entities should update the Register before making any disposal as well as on a regular annual basis;
- it is “regrettable” that the current proposals do not build in sufficient verification checks to deter criminals from submitting false information – there should be a mechanism for flagging and investigating potentially incorrect information;
- the Government should consider requiring regulated professionals to verify information submitted to the Register;
- inaccurate updates should incur criminal penalties; and
- the report makes a number of observations about the need to coordinate with the Scottish policy makers to ensure consistency.