The Economic Crime and Corporate Transparency Act 2023 – Transparency achieved for UK land ownership?

Russia’s invasion of Ukraine was the catalyst which sparked the brisk introduction of the Economic Crime (Transparency and Enforcement) Act 2022 (ECTEA). The legislation was brought in to equip the UK in its attempt to eradicate illicit finance which has been exploited through its open economy. In particular, UK land was seen as a prime target for money laundering due to the lack of transparency of ownership.

The legislation had a significant impact on overseas entities which held qualifying estates in UK land by requiring the entity to be registered, and details of its beneficial owners disclosed, on the newly created and publicly available Register of Overseas Entities (ROE) at Companies House which it must update annually. If the registration requirements are not met, the overseas entity is unable to register certain dispositions at HM Land Registry and non-compliance is an offence potentially punishable by a fine or even imprisonment.

Despite praise for the rapid response, perhaps inevitably, ECTEA was criticised for not going far enough. For ultimate beneficiaries of UK land there is a lacuna where multiple trust structures or nominee arrangements are used as the registration requirements did not extend to them and only limited details were required for the immediate trusts and trustees in a chain of trusts – not quite the transparency aimed for.

The Economic Crime and Corporate Transparency Act 2023 (ECCTA) received Royal Assent on 26 October 2023 and is the government’s response to its commitment to deliver wider-ranging reforms in the fight against economic crime and further transparency over beneficial ownership and corporate entities. There will be reforms to Companies House and corporate criminal liability laws; new mandatory identity verification for directors and persons with significant control and the introduction a new failure to prevent fraud offence. For UK land, ECCTA significantly expands the scope of the ROE and extends the pool of beneficial owners who must be disclosed.

In a nominee arrangement, it will not only be the nominee who will need to be disclosed on the ROE but also the ultimate beneficial owner under the arrangement. This is without exception and, notably, regardless of the size of their interest.

For trusts, all trustees in the ownership structure (including private trust companies) will now qualify as registerable beneficial owners. Not only will information need to be provided regarding the trustees but also on the trust itself, though the extent to which this information will be publicly available remains to be seen. 

Whilst ECCTA has received Royal Assent, the changes have not yet taken effect. When they do, any additional information which is required to be lodged regarding the overseas entity or its beneficial owners or any trusts will need to be included as part of that entity’s annual update to Companies House. That update will also need to include any changes in the beneficial ownership which occurred between 28 February 2022 and 31 January 2023 (the transitional period which was provided under ECTEA during which overseas entities could dispose of their property without having to register with Companies House).