Limited Participation: Just 31 law firms register as UK-Regulated Agents for Overseas Entity Verification
This represents less than 0.5% of the total law firms in the region, as accountancy firms dominate the landscape with over 50% of professional verifiers
The Register of Overseas Entities (ROE), implemented in August 2022, aims to enhance transparency by requiring overseas entities holding UK land or property to declare beneficial owners and/or managing officers.
A recent analysis by Thirdfort, the client compliance platform, reveals that a mere 31 law firms in England and Wales have chosen to become UK-regulated agents for verifying overseas entities.
Current Landscape: According to Thirdfort's analysis, a total of 183 firms have registered with Companies House to become UK-regulated agents, a modest increase from 146 since March 2023. Among these, law firms account for a fraction, while accountancy firms make up the majority, with only one estate agency and a mix of other financial services firms.
Harriet Holmes, AML Services Manager at Thirdfort, notes a significant rise in overseas entities complying with the new rules, but law firms and estate agents exhibit caution in verifying these entities due to regulatory concerns and associated risks. Accountancy firms, despite taking the lead in verification work, face their own set of warnings about legal, regulatory, and reputational risks, echoing concerns raised by organisations like the Institute of Financial Accountants (IFA).
Register of Overseas Entities (ROE): Introduced on August 1, 2022, the ROE mandates overseas entities owning UK land or property to disclose beneficial ownership and managing officers. The Companies House-managed register provides a compliance rate of approximately 90%, with data accessed nearly one million times. Despite these figures, concerns persist regarding potential circumvention, such as ownership through trusts or in jurisdictions lacking public information on company ownership.
A report from the University of Warwick’s CAGE Research Centre highlights that 71% of the 152,000 properties held by overseas entities in England and Wales lack information on beneficial ownership. The ROE imposes stringent consequences for non-compliance, including restrictions on land or property transactions in the UK.
Law Firms' Caution and Government Stance: Prior to the ROE's introduction, the Law Society warned law firms to exercise caution in becoming regulated agents, citing significant challenges, potential criminal prosecution, regulatory sanctions, and reputational damage due to verification regulations.
As the ROE continues to shape the regulatory landscape, the limited participation of law firms as regulated agents underscores the complexity and risks associated with verifying overseas entities. The dominance of accountancy firms in this space, despite their own set of warnings, emphasises the evolving challenges faced by professionals in adapting to and navigating the changing regulatory environment. As discussions and debates continue, the legal and financial sectors will closely monitor the impact and effectiveness of these reforms.
This analysis refers to publicly available data on the number of firms registered to become UK-regulated agents to verify overseas entities. This doesn’t constitute a complete list. There are more than 2000 UK-regulated agents.