Politicians are very good at saying they will do things. They are less good at actually doing them. After Vladimir Putin shocked the world with his invasion of Ukraine, the UK government vowed to crack down on the Kremlin’s influence in Britain. As part of this, it pledged to rid the British property market of “dirty money” from Russian oligarchs.
The result was the Economic Crime (Transparency and Enforcement) Act, which was rushed through Parliament with cross-party support and became active in August 2022. It requires overseas owners of UK property to register themselves on Companies House in a bid to create proper transparency over who owns UK property. When passed, the government patted itself on the back and said that it had acted swiftly in response to Russian aggression – which is disingenuous to say the least considering it first promised to create this register way back in 2016.
Still, there is no question that the law is a positive step. Campaigners and the government have long complained that shady characters of all kinds from around the world have been hiding their money and their identities for years by snapping up luxury houses in the UK through opaque shell companies. Estate agents, lawyers and PRs who help Kremlin-connected Russians to buy this property had been dubbed “enablers” of the Russian state in a report by parliament's intelligence and security committee, which also described “Londongrad” as the “laundromat” of the world’s ill-gotten gains.
The Paradise and Panama Papers leaks gave the public some idea as to the lengths that bad actors will go to in order to hide their wealth in UK real estate. In theory, the law passed last August puts a stop to that by requiring those buyers to make themselves known. In practice, however, the majority aren’t bothering – despite the fact that the deadline is at the end of this month.
The latest figures from Companies House show that just under 15,000 overseas entities are registered, despite both it and the Land Registry estimating that around 36,000 overseas entities own UK property. Companies House said that those who do not register by 31 January “may be liable to a fine, imprisonment or both”, but the sheer number of unregistered entities so close to the deadline implies that most overseas property owners are nonplussed by this threat.
The faulty implementation deserves as much attention and scrutiny as the policy itself. Allowing real estate to be a home for the world’s dirty money damages the UK's reputation and makes dictators like Putin harder to fight. It also has a much more direct impact on Britons: it skews the housing market. Many complain that when the proceeds of crime are used to buy luxury homes, it artificially inflates prices.
How much would a flat in central London cost if only genuine demand from law-abiding buyers remained? The effect may be minimal, it may be significant. The truth is, no-one knows.
Last year, Westminster council was reportedly mulling the use of compulsory purchase orders in order to wrest properties from Putin-associated oligarchs, but it shouldn’t need to take such drastic steps. If the government put as much energy into making sure the dirty money register is enforced as it did in fast-tracking the legislation for it through Parliament, the UK housing market could finally start to clean itself of dirty money.
