Over 3,000 Foreign Companies Escape UK’s ‘Dirty Money’ Penalties

MPs urged the government to 'get its act together' after zero penalties or prosecutions issued to overseas businesses failing to declare owners of British property

A bus goes past the Houses of Parliament and the Big Ben in London on Dec. 29, 2021. (Hollie Adams/AFP via Getty Images)

The government has been urged to “get their act together” after failing to prosecute thousands of companies that have failed to comply with Britain’s new dirty money laws.

The revelation was made to MPs on Monday after business minister Kevin Holinrake faced questions over the new Register of Overseas Entities (ROE).

A total of 3,000 elusive foreign businesses have so far failed to file details on beneficial owners to the mandatory register within the deadline.

Despite the non-compliance, zero have been issued with hefty fines or notices of prosecution.

The lack of action has been described by MPs as “extraordinary” after Hollinrake appeared before the Delegated Legislation Committee.

Labour MP Liam Byrne told the minister: “What kind of signal does that send to kleptocrats around the world—that if they want to join the ranks of the thousands of overseas entities that cannot be bothered to comply with laws in this country, they will get off scot-free?

“The committee would be sympathetic if the minister held up his hands and said, ‘we just do not have the resources to enforce the rules,’ and of course that would be true.

“That is why many of us are continuing to press him to use the Economic Crime and Corporate Transparency Bill, which is in the other place, to ensure that there is a registration fee that provides a proper supply of finance to tackle the outrageous level of money laundering and kleptocracy that is centred on the City of London.”

Over 1 Billion ‘Lost’

Referring to a recent investigation by the BBC, Labour’s Seema Malhotra told the minister that firms linked to Russian oligarchs such as Roman Abramovich were escaping fines of up to £2,500 a day for non-compliance.

She said: “Estimates from the BBC investigation suggest that had we been imposing fines since the January deadline, they could have added up to £1 billion.”

The minister was appearing before the committee for approval on a statutory instrument (SI), part of a series of secondary legislation needed to “effectively implement the register of overseas entities.”

Hollinrake said the “Penalties and Northern Ireland Dispositions” SI would deal with financial penalties arising from misconduct in relation to the register, the treatment of land disposed of in Northern Ireland by overseas entities, and the rights of those acting in good faith.

Malhorta added: “In summary, the Opposition support the changes introduced by the SI, but it is utterly vital that the government get their act together on dealing with economic crime, tackling loopholes and ensuring that we can take action quickly.

“It is years since action was initially promised, and there is a financial and security cost to that delay.”

Responding, Hollinrake confirmed that some 3,000 companies had so far failed to comply with the register.

However, he said “a significant number” of those might not have received communications and “might not be deliberately not co-operating. It is important that any enforcement action taken is proportionate.”

The minister also confirmed that legal action against the non-compliant companies would not begin until June 21.

“Companies House will be able to impose financial penalties from that date forward,” he said:.

“On warning letters, on different occasions Companies House has written to entities that have not registered—to the property of the address they own or to the service address provided to the registry.”

Children Listed as Owners

Hollinrake said increased registration and yearly fees were being introduced to support Companies House—the government body in charge of recording company details and enforcing the legislation—over resourcing issues.

He said: “We are undertaking a body of work with Companies House to determine what resources it needs and how we apply the right registration or incorporation fee—it will be a higher fee than the current £12.

“There are also annual fees—recurrent fees—for filing, which can also be used to ensure that Companies House has the right level of resources.”

Under the Economic Crime (Transparency and Enforcement) Act passed last March, foreign companies must declare their beneficial owners on the new register.

The move was designed to prevent Russian oligarchs and other foreign kleptocrats from laundering their “dirty money” through safe investments such as land and property in the UK—which are often disguised by opaque corporate ownership structures.

Overseas companies that have acquired land in the UK had until the end of January to declare their true beneficial owners under legislation fast-tracked through Parliament in the wake of Russia’s invasion of Ukraine.

Earlier this month, the House of Lords heard how the newly released register has 70 children listed as foreign company owners.

It also included one company owner born in 1897—making the person 126 years old.

The anomalies were discussed as peers revealed that the “overwhelming majority” of registered overseas companies belonged to British individuals—raising fears that some foreign entities had been used to evade UK tax laws.

Lords also raised concerns surrounding misleading information being submitted to the register—which reveals foreign ownership of British property.