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Clampdown on Russian dirty money in UK faces 'serious issues'

·Finance Reporter, Yahoo Finance UK
·3 min read
England, London, Westminster, Kensington and Chelsea, Belgravia, Grosvenor Crescent, Residential Housing. (Photo by: Dukas/Universal Images Group via Getty Images)
A new register of overseas entities is intended to stop owners of properties bought with 'dirty money' in areas such as Belgravia, London, from hiding their identities. Photo: Getty

Legislation to crack down on laundered dirty money in the UK and corrupt elites faces "serious drafting and consultation issues" that could hamper its implementation, a cabinet member told MPs.

"We are trying to do these sanctions measures broadly in alignment with our allies in the US and the EU but in terms of the legislative interventions there are serious drafting issues and consultation issues," economic secretary John Glen told the Treasury select committee on Tuesday.

The Economic Crime (Transparency and Enforcement Bill), which has been fast-tracked in face of the conflict in the Ukraine, will introduce a register of overseas entities highlighting the ultimate owners of overseas companies that control property and land in the UK.

The new processes to verify the identities of the company owners — to be carried out by Companies House — were not expected to be introduced to parliament until the autumn.

Read more: UK fast-tracks law to weed out Russia's 'dirty money'

The new register will require anonymous foreign owners of UK property to reveal their identities to ensure that criminals cannot hide behind secretive chains of shell companies.

Glen told MPs that the measures announced are a "start but there will be "a lot more that needs to happen that we will set out in due course"

He said that the pressure to move with sanctions and clampdown on dirty money was "significative" but warned of the challenge ahead.

"The wider reform will be the most significant change to Companies House legislation in over a century," Glen said.

The cabinet member said the changes had to ensure that the ease of setting up a business would remain the same but "not with some of the shortcomings that have been highlighted [dirty money]."

Opposition leader has already warned that a register of the real foreign owners of property will not come into force until autumn 2023 at the earliest – “far too long for the Ukrainian people”.

Read more: UK to ease insurance capital rules in post-Brexit shakeup

The Treasury committee showed concerns on the government's push to demonstrate the benefits of Brexit for the country amid ongoing criticism from businesses over higher costs and red tape.

Glen said that a bank CEO had recently gone up to him, complaining about the costs it had to support with time spent on consultations due to Brexit. "I do recognise that we are imposing costs through that process but we are also delivering significant benefits," he told MPs.

The new Brexit opportunities minister, Jacob Rees-Mogg, had previously said it would take half a century to feel the full benefit of Brexit. He is now calling for a rapid rewriting of legacy EU financial rules to create an "investment big bang" in the UK.

Watch: 'No place for dirty money': PM moves to stop the UK being used to launder ill-gotten wealth