In August 2022, the Register of Overseas Entities (ROE) came into force, created from the Economic Crime (Transparency and Enforcement) Act 2022.
It’s important to understand these changes so they can form part of your due diligence and Anti-Money Laundering checks.
So, do you know what it means for your business, and what you should be doing?
First things first - What’s an overseas entity?
An overseas entity is a legal entity such as a company or organisation based outside of the UK.
Businesses classed as legal entities in their own right, and governed by the law of a country or territory outside the UK, are classed as overseas entities.
For the register, this also means that The Republic of Ireland is classed as an overseas jurisdiction.
What exactly is the Register of Overseas Entities?
The register was introduced to improve transparency for law enforcement agencies, and applies to overseas entities who want to transact on property or land in the UK.
Transactions include buying, selling, transfers, leases or charges of property or land.
These entities must register with Companies House and disclose the identities of their beneficial owners or managing officers. This disclosure must be done by 31st January 2023.
Although the register only came into force in August 2022, it also applies retrospectively, too -
- England and Wales: On or after 1st January 1999
- Scotland: On or after 8th December 2014
Northern Ireland, however, is on or after 1st August 2022.
Once they are registered, the overseas entity will be given a unique ID which is to be given to the Land Registry when they buy, sell, transfer, lease or charge UK property or land.
What’s the risk?
The risk here, of course, is those who don’t reveal their identity or connection may take steps to hide it.
The approach here is different from the approach to due diligence under MLR17.
Due to its nature, the register means ownership will now involve corporate structures that span overseas jurisdictions. So, you will need to consider a few things -
-
What’s the AML risk associated with those overseas jurisdictions?
-
Are there any indications the legal ownership doesn’t reflect the true ownership and control?
-
Do you understand the laws in place in overseas jurisdictions?
-
Do you know what official documents from overseas jurisdictions look like? Could you recognise if they were a forged document?
-
What’s the business rationale for this structure? Does it make commercial sense? Do you understand its purpose?
It’s suggested that you complete verification on documents or any information which comes from a reliable source and is independent of the client.
Think about -
Existing Clients
-
If you’re dealing with an existing client, can you rely on the information already obtained through your customer due diligence procedures?
-
It’s important to note that this information may not always be sufficient, and firms cannot take a risk-based approach to verification for the register - does the existing information go far enough?
-
Consideration should be given to repeating checks performed during the CDD process, particularly if the work was done some time ago or the client’s structure has changed.
-
Verification must occur before the information is submitted to Companies House, but no more than three months in advance.
-
It’s important to note that verification is only valid at the time it is conducted, so if beneficial ownership changes after the verification date, you may be linked to an incorrect registration. In this case, the entity is obligated to notify Companies House and to use an agent to verify the new information.
New Clients
-
For new clients, it’s crucial to evaluate the trustworthiness of sources of information and to confirm that any independent legal advisers certifying documents are truly independent.
-
In some cases, information can only be obtained from the client, such as a trust deed. In these scenarios, it’s essential to consider how this information can be verified, such as by seeking confirmation from the legal firm that drafted it.
Staying ahead of the game
If you’re dealing with property, this is an important change for you to take in. But it’s important to maitain transparency and aid with law enforcement.
Ensure all your processes are robust and suitable for dealing with these changes.
Review your checks, the data you hold, and the validity of it. Has anything changed? Do you need to repeat the checks?
It’s your responsibility to stay ahead of these changes and ensure you are compliant, but with a few checks of your own, you can ensure you’re on the right track.
Further Guidance
The UK Government has released a document relating to guidance for overseas entities, individuals who are beneficial owners of overseas entities who own land in the UK, and professional advisors.
You can find this guide on the Gov UK website