The Register of Overseas Entities (ROE): What should law firms consider?
AML Services Manager
The Register of Overseas Entities (ROE) came into effect on 1st of August 2022 and will be maintained by Companies House. The concept behind the ROE is to root out bad actors attempting to hide ill-gotten gains through the UK property market.
This new legislation and implementation of ROE means the majority of overseas entities must be registered in the Register as part of this process they must declare their beneficial owners or managing officers (and update this information annually) before they can transact on UK land and property, ensuring criminals cannot hide behind secretive chains of shell companies. The register applies to new deals but it also applies retrospectively (the time frame varies depending on the country within the UK).
Why is it important for overseas entities to register?
Once the transitional period has passed, overseas entities will not be able to buy, sell, transfer or lease land or property or create a charge against the land or property in the UK unless they’ve registered with Companies House.
What is the process of ROE registration?
Any overseas company wishing to transact in UK property will have to identify its beneficial owner and present verified information to Companies House before any application to one the Land Registries in England, Wales, Scotland and Northern Ireland can be made. The overseas entity will need to engage the services of an UK-regulated agent in order to complete their registration and obtain the verification required.
A UK-regulated agent must complete verification checks on all beneficial owners and managing officers of the overseas entity before it can be registered.
There is no requirement for the agent to be the party that files the registration for the overseas entity on ROE although in most instances it is likely that this makes commercial sense. The agent can do both the registration process and the verification steps (you would need your unique agent assurance code). However, if the overseas entity or someone else wishes they can register log the registration application with Companies House. They will require the agent's details as part of the application process and the agent must still provide their signed statement declaring that verification checks have been undertaken, Companies House allow fourteen days for submission.
On successful registration, Companies House allocates a unique overseas entity ID (the OE ID) for each overseas entity, the details of entity, beneficial owners and managing directors will be added to the ROE. The overseas entity will receive a notice of registration including its unique OE ID, this must be given to the Land Registry whenever the entity transacts in UK property.
The relevant Land Registry will be prevented from registering an overseas entity as proprietor of a ‘qualifying estate’ unless the overseas entity has first obtained an OE ID.
The ROE is a public register
Most of the information disclosed to Companies House about overseas entities, beneficial owners and managing officers will be publicly available on the Register of Overseas Entities. This is a real move forward in removing anonymity and improving transparency in the UK. Restricted information will be home address, full date of birth, agent assurance code, date of verification, trust information and email addresses.
Note - if the application is successful, the details that the overseas entity has provided about the agent will be shown on the public register.
Who can be an agent for ROE verification?
The agent must be UK based and must be supervised under the Money Laundering, Terrorist Financing and Transfer of Funds Regulations 2017. Agents can be individuals or corporate entities, such as financial institutions, credit institutions, auditors, accountants, law firms and legal professionals. Estate agents, letting agents and trust and company service providers also qualify.
You must apply and be approved by Companies House in order to become an agent. A Companies House examiner will check your application, and if you are approved, you will receive a unique agent assurance code.
Why might I want to consider acting as an ROE agent?
Acting as an agent is not without risk and there is plenty to consider, however what are some of the benefits:
Given this is a new register, handling ROE applications is a niche service that could help you attract clients and additional revenue.
It's likely that some future conveyancing transactions will not go through without this service. Getting ahead of the process now will stand you in good stead to avoid this.
The information you gather will also support with any MLR 2017 requirements.
Greater protection for both you and your clients. As well as the wider UK economy by preventing money laundering and fraud.
What to consider before taking on ROE verification
If you think you may act as an agent who can verify an overseas entity then you should consider carefully:
What information you’re able to verify.
The circumstances in which you’re prepared to do so.
The Law Society has confirmed that solicitors should exercise extreme caution, only verifying what is within their actual knowledge or is based on qualified, reliable, and independent sources. The Law Society recently stated that many law firms will conclude that they are unable or unwilling to conduct verification due to the following reasons:
The availability of appropriately experienced and jurisdictionally competent advisers, knowledge of the structure and nature of ownership.
No availability of reliable and independent sources of information.
Verifiers feel they cannot verify the accuracy of certain facts.
Deciding to act as an agent for the purpose of ROE needs some serious thought. If you do proceed, ensure that you keep a written record of your decisions and considerations on the following:
A top-level agreement as to how and when ROE verification will be delivered by your firm.
Will ROE be considered on a client-by-client basis, across the board or not at all?
Have internal procedures in place for the approval of ROE verification requests.
Additional training and internal guidance may be needed to support your firm.
Have a clear appreciation of the different definitions of beneficial ownership.
Note that the risk-based approach does not apply as it does in the MLR 2017.
Ensure that only appropriately qualified and experienced individuals are permitted to approve an application, with a focus on substance and the nature of control.
Act within your own area of expertise - define this for your firm.
What should firms have in place to handle ROE applications?
Create a procedure and focus on the due diligence with a specific focus on your firm's requirements. Here’s some considerations on what your team will be required to do for the purpose of a ROE application:
Identify the level of verification needed for your firm to be comfortable with ROE applications.
Ensure verification is dated within three months of the application.
Set the parameters around when fresh copies of Customer Due Diligence (CDD) are required.
Can you verify the application through a third-party platform?
Obtain an up-to-date org structure chart.
Take reasonable steps to build the evidence base behind verification.
When obtaining a certificate from an independent source, or local law, advice may be needed to confirm the factual position.
Always check the information given and do not blindly rely upon it.
All the best practice advice published to date on ROE shows that sometimes analysis will be straightforward, while on other occasions it will be very complex. It all depends on the facts available to you.
Firms must also consider:
Updates to the terms of business and contracts (considering responsibility, ensuring that the responsibilities for renewal are set out).
Liaise with the firm's PI insurer. Does your professional indemnity cover this activity?
What if my firm does not plan to act as an ROE verifier?
Whether or not you plan on acting as a verifier, if you work within the real estate and property sector ensure that you read the guidance and the legislation. Make sure you are clear on your obligations and liability before undertaking any activity.
Particularly if you act for anyone who falls within the below two groups:
Overseas entities in property transactions.
Clients buying or leasing the property from overseas entities.
There are risks to consider even if you are on the other side of the transaction where there is an overseas entity involved. You may wish to consider your contract terms encompassing the failure of the overseas entity registering and providing evidence of their unique ID. In the event of non-registration and the matter proceeding there is likely to be criminal property and dirty money due to a criminal offence occurring.
Further guidance reading on ROE:
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