Only 27 law firms in England and Wales have signed up to verify data submitted by overseas entities to meet new corporate transparency requirements, it has emerged. The revelation follows warnings by the Law Society that solicitors could be at risk of prosecution if they sign off submissions that turn out to be untrue.
Under the Economic Crime (Transparency and Enforcement) Act 2022, overseas entities that own land or property in the UK are required to declare their beneficial owners and/or managing officers to the Companies House Register of Overseas Entities.
However solicitors have been warned to think carefully before putting themselves forward to certify the accuracy of such submissions. 'It is a serious undertaking,’ Dominic Sedghi, head of knowledge at City firm Macfarlanes, told the Law Society’s risk and compliance conference last week, warning that law firms run the risk of committing a criminal offence. In guidance on the Register of Overseas Entities the Law Society has warned that risks include possible criminal prosecution, regulatory sanction and reputational damage.
Analysis by client-verfication system supplier Thirdfort suggests that law firms are heeding such warnings. It found that 146 businesses have registered with Companies House to become UK-regulated agents who can complete verification checks on beneficial owners. Of these businesses, 27 are law firms – accounting for 0.3% of the 9,550 law firms in England and Wales.
Of the remaining 119 registered agents, 75 are accountancy firms and one is an estate agency. The rest are a mixture of company formation, wealth management or other financial services firms, Thirdfort said.
The government has admitted that only 19,510 registered overseas entities – out of 32,440 – had declared their beneficial owners before the 31 January deadline.
Sedghi told last week's conference that certifying the nature of a beneficial owner's control poses particular risks. While it is in theory possible to rely on information from the owner themselves, 'you have to be confident the information you have is true,' he said. 'That is a very high bar.’ Taking a 'risk-based approach' is not acceptable, he said.
Harriet Holmes, AML services manager at Thirdfort, described the register of overseas interests as 'a positive step forward'. But she said that, with more than 10,000 entities having missed the registration deadline, 'there is a significant amount of work to do and a big question mark on whether Companies House has adequate resources to deal with a large amount of non-compliant entities.'
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