Parliamentary Joint Committee: Report on draft Registration of Overseas Entities Bill
On May 20, 2019 the House of Commons and House of Lords Joint Committee (Committee) on the draft Registration of Overseas Entities Bill published a report following its pre-legislative scrutiny of the draft Bill. The Bill aims to increase the transparency of who owns land in the UK and will establish a public register of beneficial owners of overseas entities that own or purchase land in the UK.
The Committee welcomes the Bill and supports the Government’s ambition to improve the transparency of overseas beneficial ownership in the UK property market, but outlines a number of key concerns and makes several recommendations aimed at improving the draft legislation.
The conclusions and recommendations outlined in the report include:
- Trusts – Since trusts are not technically "entities", the Bill does not cover trusts and the Committee has concerns that they will be used to circumvent the draft Bill’s obligation on entities to register. The Committee therefore recommends that the Government’s plan to ensure that trusts are transparent, as to be provided for in its implementation of the Fifth EU Anti-Money Laundering Directive, be introduced at the same time as the draft Bill.
- Exemptions – The Bill allows the Government to exempt certain entities from the requirement to register and from the requirement to publish beneficial ownership information. The report recommends that the Government should make clear in the legislation exactly which entities are to be exempted and, to be as transparent as possible, the Government should publish in an annual statement to Parliament the number of times these exemptions are used.
- Updating – Out-of-date information will mean the proposed Register is not fit for purpose. As a result, the report suggests that vendors of property should update their ownership information once a year, but also update information about proposed transactions before they take place, capturing information at the point where most money laundering occurs.
- Accuracy – The report highlights concerns that current proposals lack verification checks to deter individuals, including criminals, who want to submit false information. It suggests that a workable verification mechanism could, for example, delegate verification responsibilities to Companies House or regulated professionals.
- Enforcement – The Committee is aware that enforcing this new law may be difficult. Without enforcement the Bill risks being an ineffective deterrent, and the report therefore suggests that civil penalties will be easier than criminal sanctions to enforce abroad, and against land or other assets in the UK. They could be backed up by criminal sanctions for non-payment.
(Joint Committee: Report on draft Registration of Overseas Entities Bill, 20.05.19)
(Joint Committee: Report on draft Registration of Overseas Entities Bill press release, 20.05.19)
Independent review of the Modern Slavery Act: Final report
On May 22, 2019 the Final Report of the independent review of the Modern Slavery Act 2015 (Act) was laid in Parliament. The review was launched in July 2018 with Frank Field MP, Maria Miller MP and Baroness Butler-Sloss being asked to lead the review team. The final report was submitted to the Home Secretary on March 29, 2019. It provides evidence and recommendations on areas of the Act which concerned the Independent Anti-Slavery Commissioner (Commissioner) and transparency in supply chains, amongst others.
Section 54 of the Act requires large commercial organisations supplying goods or services, and carrying on a business in the UK, to prepare a slavery and human trafficking statement for each financial year. In the statement the company must state the steps it has taken to ensure that slavery and human trafficking is not taking place in its business or its supply chains, or it must state that it has taken no such steps. The Review considered how to ensure compliance and improve the quality of modern slavery statements produced by eligible companies.
Guidance issued under section 54(9) of the Act (Guidance) suggests six areas that businesses are expected to report. The Review acknowledges that these provisions have contributed to better awareness of modern slavery in companies’ supply chains, but notes that many eligible companies are not complying with the legislation at all. In light of these findings, the Review sets out a definitive list of recommendations for reform in order to ensure compliance and to improve the quality of modern slavery statements produced by companies.
The recommendations including the following:
- The Government should establish an internal list of companies falling within the scope of section 54, but companies should remain responsible for determining if they need to produce a slavery and human trafficking statement. Non-inclusion in the list should not be an excuse for non-compliance.
- Companies should not be able to state that they have taken no steps to address modern slavery in their supply chains, as the legislation currently permits.
- The six areas of reporting currently recommended in the Guidance should be made mandatory.
- Modern slavery statements should be dated and clearly state over which 12-month period they apply.
- The Government should set up a central repository for statements to which companies are required to upload their modern slavery statements and which should be easily accessible to the public, free of charge.
- The Independent Anti-Slavery Commissioner (Commissioner) should monitor transparency.
- Sanctions for non-compliance should be strengthened.
- The Government should bring forward proposals for an enforcement body to enforce sanctions against non-compliant companies.
- The Government should extend the section 54 requirements to the public sector and strengthen its public procurement processes.
- The Companies Act 2006 (CA 2006) should be amended to include a requirement for companies to refer to their modern slavery statement in their annual reports, and section 54 of the Act should be amended to impose a similar duty on non-listed companies that meet the relevant size threshold but would not be captured by CA 2006 reporting requirements.
- Businesses should have a named, designated board member who is personally accountable for the production of the modern slavery statement.
- Failure to fulfil modern slavery statement reporting requirements or to act when instances of slavery are found should be an offence under the Company Directors Disqualification Act 1986.
In addition to this, the review sought to determine how the Commissioner’s autonomy and freedom to scrutinise Government policy and promote efforts to tackle modern slavery could be strengthened, both in statute and in practice. The review team believes that the Commissioner’s primary roles in carrying out his/her statutory duties should be: to advise the Government on measures to tackle modern slavery; to scrutinise and hold the Government and its agencies to account on their performance; and to raise awareness and promote cooperation between sectors and interest groups.
The Government will consider the review’s recommendations and will respond formally in due course.
(Independent review of the Modern Slavery Act: final report, 23.05.19)