The government has set out a timetable for the creation of a register of the names of individuals who own UK real estate through overseas companies by 2021.
It is beyond question that the government needs to stamp out the use of UK real estate as a means of laundering the proceeds of crime and also collect any tax due to it. Taking the lead on this vast global issue is praiseworthy indeed. Nonetheless, it is very debatable whether the public should have open access to this information as seems to be suggested.
The Panama and Paradise Papers scandals have brought the subject of overseas ‘shell’ companies owning UK real estate into sharp focus.
There is a purported £120 billion worth of real estate in England and Wales owned by these companies today. Undoubtedly, many of them are perfectly legitimate but many may not be. The government has indicated that £180 million worth has been investigated by police since 2004 and these companies constitute about three-quarters currently under investigation for involvement in money-laundering.
Consequently, the government is looking to protect the UK property market and its standing both at home and abroad. Amendments to the draft Sanctions and Anti-Money Laundering Bill will require all overseas companies owning UK real estate to disclose the identities of their ultimate beneficial owners as a deterrent to potential money-launderers and tax evaders.
However, this proposal may have very unfavourable albeit unintended consequences.
Many honest and law-abiding individuals use off-shore companies (and pay tax) as purchasing vehicles for real estate in order to maintain their privacy because of their celebrity, dignitary or affluent status. They simply wish to avoid the adverse attention which publicity brings. The ‘world’s first’ register of its kind may not be such a prized moniker after all for the UK as those individuals choose to make their home or invest elsewhere in the world where privacy can still be achieved.
Furthermore, it seems obvious that a public register might also be used by the very people it was meant to protect against and become a directory of the ‘rich and famous’ for criminals to target.
And lastly, there is the fundamental question of human rights.
Surprising to many, there is no over-arching cause of action against invasion of privacy under UK law. Nonetheless, the European Convention on Human Rights (ECHR) (incorporated in the UK by the Human Rights Act 1998) has been relied upon repeatedly to uphold the right to privacy.
Article 8 of the ECHR provides that “Everyone has the right to respect for his private and family life, his home and his correspondence.”
Claimants must first exhaust all domestic remedies and suffer a significant disadvantage as a result of the alleged violation. Potentially, becoming a victim of crime as a result of this register could be argued as ‘disadvantage’.
It would seem more prudent to restrict access to authorised persons and purposes. No doubt, the legislators will remove any failings from the current proposal before the register comes into effect.
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