EU update – October 2020

October 26, 2020

Companies House Reform

The UK’s company registrar, Companies House are set to reform procedures to clamp down on fraud and money laundering.

In April 2016, the UK led the way by introducing the Persons with Significant Control (PSC) Register, or better known as a Ultimate Beneficial Owner (UBO) database. It became a requirement for any individual with ownership or control of 25% or more of a business to be listed on the register. However, until now that information has gone unchecked. At the centre of the plan to reform Companies House is an effort to verify the information submitted, in particular the details of who ultimately owns each UK registered company

The timing of this announcement came just two days before the ICIJ and media partners published the FinCEN Files leak, reporting suspect money flows of more than $2 trillion between 1999 and 2017. FinCEN analysts described the U.K. as a “higher risk” country due to the fact that many of the shell company’s listed were registered to the UK. There were over 3000 U.K. shell companies identified in the leak.

Its unclear at this point whether the ID verification will also be carried out on the existing data or newly registered businesses only.

Cyprus

Cyprus is suspending its citizenship-by-investment program from 1^st November 2020.

The European Commission announced it would be taking legal action against Cyprus and Malta (and sent a strongly worded letter to Bulgaria) over their investor citizenship programmes, also known as “golden passport” schemes.

A recent media sting exposed top Cypriot politicians pledging to help a fictitious Chinese investor convicted of Money Laundering, secure Citizenship and in turn an EU passport. Demetris Syllouris, the speaker of parliament, and Christakis Giovanis, were both shown to offer their support to the undercover journalist. Both have since resigned.

Earlier this year Cyprus announced a number of change to the scheme following increasing pressure from the EU. It had been revealed that Cyprus had issued passports to a number of undesirable characters including several relatives of Hun Sen, Cambodias authoritarian prime minister and Jho Low, a Malaysian businessman alleged to have been embroiled in the country’s 1MDB scandal.

As long as they exist, Europe will be vulnerable to such schemes being used as a backdoor into the EU economy for criminals to launder proceeds of crime or for others to evade tax.