The Mone Scandal Shows New Laws Around Offshore Ownership Aren’t Working
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The furore around the Conservative Peer Michelle Mone and her concealment of involvement in a £203 million Covid contract shows that laws requiring offshore companies to list their beneficial owners are being ignored.
In 2022, the Register of Overseas Entities (ROE) came into force in response to the Russian invasion of Ukraine, with the Government pledging to “require anonymous foreign owners of UK property to reveal their real identities to ensure criminals cannot hide behind secretive chains of shell companies”. However, research by Byline Times shows that many companies that own property in the UK continue to obscure their real owners.
Held by Companies House, the ROE “requires overseas entities that own land or property in the UK to declare their beneficial owners and/or managing officers”, and promises “severe sanctions for those who do not comply”.
A beneficial owner is “any individual or entity that has significant influence or control over the overseas entity”. However, many businesses seem to be avoiding the new rules, with only 40% of offshore companies having registered by March 2023. LSE researchers revealed in September that “70 per cent of properties held via overseas shell companies (109,000 out of 152,000) still do not publish information about who really owns them”.
The new legislation is useful from a journalistic perspective because it allows us to check company records with publicly available information about who benefits from particular companies. Tory peer Michelle Mone and her husband Doug Barrowman are connected to a number of companies that don’t appear to list them as their ultimate owner.
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While PPE Medpro doesn’t seem to own property in the UK, it currently lists Arthur John Lancaster as its beneficial owner, who the website Tax Policy Associates says is “an accountant who is closely connected to Douglas Barrowman and the Knox Group. Lancaster was recently described by a tax tribunal as “seriously misleading”, “evasive” and “lacking in candor”.” Tax Policy states that if Barrowman intentionally hid his ownership of PPE Medpro, “then criminal offences were committed.”
Tax Policy Associates also reported this week that Barrowman and Mone hid their ownership of a house in Belgravia through two British Virgin Islands companies and a trust, none of which name them as the beneficial owners on Companies House.
Following their interview with the BBC, the broadcaster reported that “Mr Barrowman said that he had led the PPE Medpro consortium, even though he is not listed at Companies House as having any connection to the company. He told the BBC that he was, in effect, the ultimate beneficial owner of the firm”.
What about the Russian oligarchs whose activities in the UK were the reason for the introduction of the ROE legislation? The Cypriot website Philenews stated in February that “Only four Russian nationals under British Government sanctions appeared on the [ROE] register as of Thursday morning. They were: Vladimir Potanin, one of Russia’s wealthiest businessmen; Russia’s former first deputy prime minister Igor Shuvalov and his wife; and Alexander Frolov, the former chief executive officer of Evraz, a Russian steel and mining company.”
Bloomberg reported in February that the register revealed Frolov’s property in Knightsbridge and St George’s Hill in London
Oliver Bullough, author of the book Butler to the World, told Byline Times that wealthy oligarchs would generally not bother using shell companies in offshore jurisdictions like the Isle of Man, which is known as a location for registering private jets. Instead, they are more likely to use trusts to hide their ownership of UK property. While HMRC holds information on who the beneficiaries of trusts are, this information is not public.
However, it doesn’t seem that some Russian oligarchs with known property in the UK are abiding by the legislation either. Oleg Deripaska, for example, is known to own a property in Belgrave Square, whose registered owner according to the Land Registry is a company based in the British Virgin Islands, and not registered on Companies House.
Beechwood House in Hampstead, previously owned by sanctioned Uzbek-Russian businessman Alisher Usmanov, was reported to have been transferred to a trust in 2022 before he was hit with sanctions. The Land Registry title deed gives its owner as Hanley Ltd, a company that lists its beneficial owner as the Swiss based Pomerol Capital Sa, and its correspondence address as another Geneva company which is part of the Summit Group, “a leading independent provider of personalised fiduciary and administrative services”.
Usmanov's lawyers told Byline Times that he does not own Beechwood House, and that it was transferred to a trust in 2008, long before sanctions were imposed. He claims to no longer be a beneficiary of the trust as of 2022, and that the transfer of assets to the trust was done to benefit his relatives.
One offshore property owner who does seem to have complied with the legislation is Sheikh Khalifa bin Zayed Al Nahyan, President of the United Arab Emirates. The Guardian revealed in 2020 that he had a £5 billion London property empire, and judging by the title deed to his Berkeley Square properties, the company which owns them, Berkeley Square Holdings Limited, does in fact register that its owner is the ‘Private Department Of The President Of Uae’.
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Besides oligarchs and oil sheikhs, property developers who own UK property through offshore companies also need to comply with the ROE legislation.
Byline Times has looked at dozens of companies based at the same address in the Isle of Man, many of which are linked to the property tycoon Asif Aziz and managed by the company Golfrate, which Aziz founded in 1991. The Times reported in 2020 that “Golfrate is run by Aziz's family and controls 900 properties”.
A number of companies registered here were reported by Private Eye in 2015 to be involved in buying up pubs in London and turning them into luxury apartments. Planning documents from 2023 show that Golfrate is still acting for companies registered in the Isle of Man, such as Hamna Wakaf Ltd. Many of the companies registered at the address list another offshore company, Circumference Fs (Cayman) Ltd as their owner.
In a recent House of Commons debate on the Register of Overseas Entities, Labour MP Siobhain McDonagh, said, “Journalists have revealed that the family of Asif Aziz, a landlord to my constituents in Britannia Point, Colliers Wood, manages a large property portfolio registered under dozens of companies on the Isle of Man.” Britannia Point is owned by another company registered at the same Isle of Man address which also lists Circumference Fs (Cayman) Ltd as its ultimate beneficial owner.
Asif Aziz’s lawyers insist he has “never closed down a pub” and “is not the beneficial owner” of companies managed by Golfrate. Listing a Cayman Islands financial services company as the beneficial owner of another offshore company may not be against the Register of Overseas Entities rules, but raises the question about whether those rules themselves are effective.
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Analysis by BBC News and Transparency International in February suggested that “almost half of firms required to declare who is behind them failed to do so.” At that time, Transparency International said around 52,000 UK properties were still owned anonymously.
The Department for Business, responding to a Freedom of Information request sent by Byline Times, said “Companies House has begun enforcement against overseas entities that have either failed to register or have failed to provide their annual update on time. For the offence of failing to register, 3190 warning notices have been sent, which has brought a number of overseas entities into compliance, and 45 penalties to a total value of £2,100,000 have been issued so far (data as of 17 October 2023).” How much money has actually been collected in fines is unclear.
Although new reporting requirements have been introduced for companies where the Beneficial Owner is a trustee of a trust, LSE reported that “In an overwhelming 87 per cent of cases, where the researchers found that beneficial ownership information was missing or inaccessible to the public, it was due to deliberate choices by Government to keep the information out of scope of the legislation, rather than rule-breaking by overseas companies.”
A spokesperson from the Department for Business and Trade said, “The Economic Crime and Corporate Transparency Bill will bear down on kleptocrats, criminals and terrorists who abuse our open economy, strengthening the UK's reputation as a place where legitimate business can thrive. We are committed to publishing a consultation before the end of the year on how to make trust information more transparent”.
Labour peer Lord Coaker, responding to the passage of the Economic Crime and Transparency Act, which tightens up reporting requirements for the ROE, said “The Bill is an important step forward, but the enforcement of it is everything. If laws that have been improved are not enforced, much of the debate and discussion we have had will not be as valuable as it should be.”
This article was updated on 25/12/23 with more information on Alisher Usmanov’s connection to Beechwood House