Anti-corruption rules fail to force clarity on property ownership, MPs say

Coalition plan for stripping ‘cloak of secrecy’ from shell firms that leaves housing loophole slated by politicians and other critics

Business minister Matthew Hancock unveiled ‘the first UK anti-corruption plan bringing action across the government’. Photograph: Jack Taylor/Barcroft Media

Government plans to rip “the cloak of secrecy” from corrupt officials who hide stolen money in the UK, fail to tackle an obvious loophole in the London property market, say MPs and campaigners.

The concerns were raised as the government unveiled a long delayed anti-corruption plan published on Thursday.

Matthew Hancock, the Conservative business minister, faced questions in the Commons about why the new rules aimed at improving transparency of company ownership would not apply to the property market.

Announcing the plan, he said: “This is the first UK anti-corruption plan that brings together actions across government. It makes significant steps forward … but nobody would say the job is complete.”

The government has promised to establish a central register of company owners, open to public scrutiny and not just accountants. The new rules make it a crime to provide false information or refuse to disclose the true owner of a company.

At the G8 summit held in 2013 at Lough Erne, Northern Ireland, David Cameron promised to strip away “the cloak of secrecy” around shell companies, which are often located in offshore tax havens.

MPs across the political spectrum voiced concern that the government plan would not stop corrupt foreign officials or business people from sinking ill-gotten gains into the London housing market, because there would be no requirement to disclose ownership of property. About 45% of London homes worth more than £2m are owned by overseas trusts, according to campaigners.

The Labour MP Kerry McCarthy questioned why the government had left this gap. “Is it not in public interest we should know who the beneficial owners are? Doesn’t he [Hancock] think the time for action is now?”

The Conservative MP Stephen Barclay called the property loophole one of the “notable omissions of the plan”.

Robert Barrington, executive director of Transparency International, said the failure to include property was “a really obvious” gap. “If a house in London is owned by an offshore trust, absolutely no one has any idea who owns it.”

Hancock told MPs the government would look at expanding the register of beneficial ownership, without giving further details.

He also announced that the government was creating a body to tackle bribery and money laundering, by bringing together anti-corruption investigators from the National Crime Agency, the Metropolitan police and City of London police into one unit.

The National Crime Agency, dubbed the British FBI, was created in 2013 to tackle the UK’s most serious crimes, including fraud, money laundering, organised crime and border policing. It replaced the Serious Organised Crime Agency and other bodies, but was given a budget smaller by 20% than that of its predecessors.

The bribery and corruption unit, housed within the NCA, will come into operation in April, but many fear it could take much longer for the new agency to find its feet.

“The execution and integration risks are very, very, high,” said Barrington. “One can make a case why it needs to be done, but it needs to be done very well. Otherwise there is a risk that cases might be severely interrupted or dropped”.

Barclay, who used to have a senior anti-money laundering role at the City regulator, raised concerns that the new unit would struggle to attract qualified officers, because NCA terms and conditions were not as good as there were for the regular police.

He also said anti-corruption officers faced “a pernicious time limit” of just 38 days to prove complex corruption cases.

The MP told the Guardian this December that the government’s anti-corruption plan failed to address many flaws in the UK’s anti-money laundering regime.

Tom Keatinge, director of the Centre for Financial Crime and Security Studies, at the Royal United Services Institute, said that the private sector was also concerned about budget cuts to public anti-corruption agencies.

He called on government agencies to work more closely with banks and businesses to make money-laundering investigations more effective. “We are not using the private sector as effectively as we could do. Private companies are spending hundreds of millions of dollars every year [on anti-corruption measures] – way more than the government could ever dream of. There is an impressive aspirational list of things to do. But are they really doing to manage, across all these different departments to do all these 60 different things over a 12-15-month period that includes a general election?”

Observers have broadly welcomed the announced measures but have questioned the government’s ability to implement the sprawling plan with its 66 different targets spread across multiple Whitehall fiefdoms.

• This article was amended on 19 December 2014. An earlier version described Matthew Hancock as “the Liberal Democrat business minister”