UK government resists moves for tighter corporate transparency

The government is pushing back against an attempt by some members of the House of Lords to close loopholes in transparency legislation that was passed last year as part of a crackdown on dirty money passing through the UK.

In a letter sent by the Treasury and the UK government’s business department to a member of the House of Lords in July, the government said that it opposed making information on beneficiaries of trusts available to the public without a consultation.

The letter, addressed to Lord Theodore Agnew, warned that doing so might lead to legal challenges over individuals’ right to privacy and could ultimately undermine the UK’s efforts to increase transparency.

The European Court of Justice last year ruled that public disclosure of the ultimate owners of companies could constitute a violation of an individual’s privacy. As a result several countries restricted access to beneficial ownership information. Campaigners have criticised the judgment as a backwards step in efforts to improve corporate transparency.

“The government view remains that publishing all trust data could be problematic,” minister for investment Lord Dominic Johnson and Lords treasury minister Baroness Joanna Penn wrote in the letter, seen by the Financial Times.

“We know from the recent European Court of Justice ruling on the EU’s beneficial ownership framework . . . that it is vital to maintain a proportionate balance between transparency and privacy.”

The letter to Agnew is the latest salvo in a fierce debate over the efficacy of UK government attempts to crack down on kleptocrats and criminals using Britain as a destination for laundering their money.

This issue was placed into sharper focus when Russia’s full-scale invasion of Ukraine led to a number of wealthy Russians holding assets in the UK being placed on the sanctions list.

Last year, the government introduced long-awaited transparency legislation that required offshore companies that own property in England and Wales to name their ultimate owner in a register of overseas entities.

However, a number of recent high-end London property transactions have highlighted its shortcomings, with wealthy individuals using trusts and so-called nominee agreements — when one person agrees to act on behalf of another — to obscure the ownership of assets.

For example, when an Indian billionaire agreed a £113mn deal to buy Hanover Lodge, a large mansion in London’s Regent’s Park, Companies House, the UK’s corporate registry, showed that the beneficial owner was a Cypriot trust called Proteas Trustee Services Ltd.

As of mid-April, 15 per cent of the 32,440 overseas companies that own properties in Britain had failed to register their beneficial owner, according to Companies House. Transparency International, a campaigning group, estimates almost 6,900 companies in the UK are owned through a trust structure.

This has led the Labour party, transparency campaigners and members of the House of Lords to call for reform of the legislation.

In June, the Lords voted in favour of an amendment that would require Companies House to make public information about the beneficiaries of trusts. It was one in a series set to be debated in the House of Commons on September 4.

In the letter to Agnew, Johnson and Penn said the government was “fully committed” to launching a public consultation as to how to best improve transparency of trust information before the year end.

In a debate in June, Agnew called consultations “the oldest trick in the book, frankly, for kicking cans down the road”.

Instead of publishing data on beneficiaries of trusts by default, the government has proposed to make the information available to certain people, such as investigative journalists, “under certain circumstances”.

The letter to Agnew said Companies House would work with Transparency International, among others, to ensure that the mechanism to access information on trust ownership was clear and “meaningful” feedback would be provided if access was denied.

A spokesperson for the department for business and trade said: “The economic crime and corporate transparency bill will bear down on kleptocrats, criminals and terrorists who abuse our open economy, strengthening the UK’s reputation as a place where legitimate business can thrive.”

The Treasury did not respond to a request for comment.

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