Register of Overseas Entities – what does it mean for conveyancers?

The implementation of a Register of Overseas Entities (ROE) will help law firms tackle the opaque nature of foreign ownership and support efforts to tackle money laundering in the UK property market, says Mike Ward, Executive Chairman of Armalytix on the latest Today’s Conveyancer Podcast.

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Effective from 1^st August, overseas entities are required to provide greater transparency over their beneficial ownership to aid efforts to crack down on money laundering.  The Register of Overseas Entities is part of the Economic Crime (Transparency and Enforcement) Act 2022 implemented in the wake of the Russian invasion of Ukraine.

In the podcast Mike discusses the practicalities of the implementation of the register and the impact on conveyancing firms. From 1^st August, conveyancers involved in transactions involving overseas entities (a legal entity governed by the law of a country or territory outside the UK) may not be able to continue subject to their status. The government have confirmed that the Republic of Ireland is an overseas jurisdiction for the Register of Overseas Entities.

Overseas entities transacting property or land in the UK must register with Companies House and provide more information on beneficial owners.

The new regulations will also apply retrospectively to overseas entities who transacted on or after 1^st  January 1999 in England and Wales and 8 December 2014 in Scotland; the deadline for registration for retrospective transactions is 31^st January 2023.

In order to submit an ROE registration, the legislation requires overseas entities to provide evidence to an “Agent” of beneficial ownership and legitimacy. An “Agent” must be subject to the Money Laundering, Terrorist Financing, and Transfer of Funds Regulations (2017) and will typically be a financial institution, accountant, lawyer or estate agent.

In recent days The Law Society has released its own guidance on ROE and counselled conveyancers to consider avoiding being Agents:

“It’s important for you to recognise that verification for ROE purposes is a very different task to the risk-based approach to client due diligence under the money laundering regulations. It’s probably, in the main, not for property lawyers to provide this.”

“It is very different from the LSAG guidance. The onus is going to much higher in terms of validating these overseas entities, than what is done in the LSAG framework around customer due diligence.”

Mike also points out the practical impact for conveyancers from a contractual point of view.

“If your seller is an overseas entity, you need to put stipulations in the contracts now to make sure this all subject to them getting an overseas entity registration code.”

Since 2010 foreign ownership of UK property has tripled and according to Mike, 1% of all UK residential property is now in foreign ownership. So this is not an issue confined to commercial property. Nor is it purely a London-centric issue, with foreign ownership spreading to other cities like Manchester, Leeds and Liverpool. And you don’t have to be acting for an overseas entity to be impacted by this as chains where there is an overseas entity involved will be affected.

It may well be the case the acting for overseas entities creates a specialist industry within conveyancing, suggests Mike, given the risks and subject matter expertise required.