Kate Burt, Legl’s Head of Risk and Compliance, recently hosted a webinar with Ian Quayle of IQ Legal Training on the impact of the new Register of Overseas Entities (ROE) on law firms. The ROE became effective on 1 August 2022 as a result of the Economic Crime (Transparency and Enforcement) Act 2022.
In the session we discussed the risks facing law firms when acting for overseas entities, and firms acting for clients who are purchasing UK land from overseas entities.
Why has the Register of Overseas Entities been introduced?
The ROE was created following Russia’s invasion of Ukraine and is designed to increase transparency of ownership of overseas entities in an attempt to tackle financial crime.
The ROE is distinct from the Persons with Significant Control (PSC) regime brought about by the Companies Act 2006 which is also held and governed by Companies House.
Who does the Register of Overseas Entities apply to?
The new rules apply to legal entities that are governed by the law of a country or territory outside the UK and have an interest in UK property. This applies across the UK but there are differences in how they operate in England and Wales, Scotland and Northern Ireland due to differences in land registration systems particularly in relation to the date the entity acquired the property.
Register of Overseas Entities - the key points:
- Entities that currently own UK land as well as overseas entities that have disposed of or are intending to dispose of UK land must do so between the dates 28th February 2022 and 31st January 2023.
- There is an obligation on the entity to keep the ROE records up to date.
- The consequences of breaching the Economic Crime (Transparency and Enforcement) Act 2022, of which the ROE forms a part, could lead to criminal liability for the entity and potentially their advisors.
- There are distinct differences between the Anti Money Laundering Regulations (MLRs) and ROE, and the two regimes should not be conflated.
How the ROE interacts with your firm’s existing AML processes
There is a similarity with your current AML regime, however there is a distinction between MLRs and the ROE to be aware of:
- Unlike the MLRs there is no risk-based approach to verification under the new Regulations and so relevant persons must be confident they’ve seen documents and/ or information from reliable, independent sources to verify each piece of relevant information.
- There are different definitions of ‘beneficial owner’. This is because the definitions in the Economic Crime (Transparency and Enforcement) Act 2022 closely mirror the definitions used for the People with Significant Control (PSC) for UK companies. Firms should refer to the Act to understand the conditions to be a registrable beneficial owner.
- Verification required under the The Act is not a ‘supervised activity’ for the purposes of AML, unlike activity under the MLRs. However, knowledge or suspicion of certain activity will still trigger the requirement to submit a Suspicious Activity Report to the National Crime Agency.
Use tech as a tool - not as a silver bullet
If your firm currently acts for overseas entities, has done so in the past or acts in a transaction where one of the parties is an overseas entity you will need to consider your obligations to your client to advise them of the process and possible delays or difficulties relating to transfer of ownership of the property and any other risks, including criminal liability.
Conveyancing firms in particular should assess their exposure by taking the following steps as outlined by Kate Burt and Ian Quayle in our recent webinar.
What your firm should do now
- Consider your exposure in this area by identifying affected matters you’ve acted for since 1999.
- Consider your appetite for working with overseas entities now and in the future.
- Raise staff awareness of the change in legislation and your firm’s approach.
- Watch the webinar for more information.
