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Could shell companies become more transparent?

Service Area: Fraud

Member: Roger Isaacs

Shell companies have long been the vehicles for hiding assets, being based in tax havens such as the British Virgin Islands (BVI), which are notoriously difficult to investigate.

However, the Government is committed to publishing a register of the true owners of overseas entities that hold UK property.

Kelly Tolhurst, Minister for Small Business, who is overseeing the policy, has promised to “deliver an operational register in 2021”, which should help to identify who owns the 96,812 properties in England and Wales owned via overseas companies.

Last year, reforms to Companies House legislation made it easier to trace company ownership and management, while offering business owners and businesses greater protection from fraud.

This will be vital in forensic financial investigations, as shell companies are often used by criminals to launder money or hide assets.

Forensic examinations often aim to find where funds may have come from and whether they were acquired by illegal means. Therefore, making shell companies more transparent will be a huge boon.

The Serious Fraud Office (SFO), for example, is currently investigating the suspicious wealth of Gulnara Karimova, daughter of the late Islam Karimov, former president of Uzbekistan.

Among the assets the SFO wants to examine are a mansion on the famous Wentworth Estate in Surrey and a property in Mayfair.

The Wentworth property was bought in 2011 for £18 million but according to the ownership documents, the owner is not Ms Karimova but a shell company in the BVI.

Roger Isaacs, Forensic Partner at Milsted Langdon, said: “Getting to the origins of the wealth of private individuals when there is no apparent explanation as to how they could have accumulated so much money is a complex exercise, which is only made more difficult where a shell company is involved.

“I am sure that tax and prosecuting authorities will welcome the creation of this new register that identifies the ownership of properties registered with shell companies. It may soon be possible to know whether, as has often been alleged, the UK, and London in particular, has really become a favoured haven for the investment of the proceeds of crime. If it has, only time will tell what the knock on effect will be on uk property prices, which many commentators have speculated have been artificially inflated by the influx of ill-gotten gains from illegal activities overseas.”

Author: Roger Isaacs
7 February 2020

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