The UK's new policy of requiring the Land Registry to publish information about foreign companies that own property in England and Wales could have a major effect on the trust industry and its ability to service HNWs, with compliance officers in the front line.

Not only could the new policy ultimately speed up the recovery of monies from fraudsters who have "hidden" their victims' money in a variety of corporate structures; it could also damage the offshore trust industry that manages the resources of vulnerable high-net-worth individuals who need some kind of anonymity to protect them from predators. It follows that if the trust element is removed, the whole point of having an offshore vehicle will be thrown into doubt.

A word from the PM

In a recent speech in Singapore, prime minister David Cameron of the United Kingdom proposed to introduce new measures to stop offshore companies from disguising the purchase of high-value UK property with "plundered or laundered cash." By his reckoning, more than 100,000 property titles worth around £122 billion are currently registered to offshore companies.

"A truly open, transparent property system identifying the ultimate beneficial owner of English properties will assist the fight against fraudsters and ultimately aid in recovering stolen money for victims. Currently, offshore trust companies allow fraudsters to create property holding vehicles with ease. These allow fraudsters to buy property in England with plundered or laundered cash with no visibility as to who the true ultimate beneficial owner is.

"Civil fraud solicitors who pursue a fraudster who has taken a client's money then need to follow the money trail through various banks, normally in offshore jurisdictions. This requires the use of a specialist civil fraud solicitor to obtain disclosure orders in the relevant jurisdictions which takes time and money - both of which are true luxuries when you are a victim of fraud."

The Kazakh PEP

Cameron's speech came a week after Global Witness, the group of anti-corruption campaigners, alleged that the ultimate ownership of "big chunks" of prime property in central London could be linked to a corrupt former Kazakh secret police chief. Cameron made reference to the case in his speech as an example of the need for action to prevent the UK from becoming "a safe haven for corrupt money from around the world".

Vulnerable HNWs have nothing to hide!

"The vast majority of foreign-owned businesses that invest in property in the UK are entirely legitimate and proper, and have nothing at all to hide," he said.

"But I want to ensure that all this money is clean money. There is no place for dirty money in Britain. Indeed, there should be no place for dirty money anywhere. That is my message to foreign fraudsters: London is not a place to stash your dodgy cash," he said.

First steps

As a "first step", Cameron believes, the Land Registry should publish data showing "for the first time" the full set of titles owned by foreign companies this autumn. The government also wants to consult interested parties about the extension of new 'transparency' obligations that it wants British companies to shoulder to foreign companies too. It also wants to "look carefully at the case for insisting that any non-UK company wishing to bid on a contract with the UK government should also publicly state who really owns it".

The Vince Cable registry

The UK promosed to create of a central registry of companies' beneficial owners, meaning those that hold more than 25% of a company's shares or voting rights, as part of its presidency of the 'Group of 8' industrialised nations in 2013. The requirements will apply to all British bodies corporate that currently register information on their members at Companies House, including limited liability partnerships, and the register will be made available for public inspection. It is due to be up and running next April.

Cameron said in his speech: "This will open up a new era of corporate transparency in Britain but, of course, it will only apply in Britain and for British companies. So the aim should surely be for others to follow. To really tackle corruption effectively, we need to be able to trace data from one country to another. We don't want criminals to be able to go unnoticed, just because they move money across borders or have assets in different countries. The torchlight should be able to follow them."

He said that HM Government would "continue to make the case for transparency with international partners", including those in the British Overseas Territories and Crown Dependencies. It will also host an international anti-corruption summit in London next year.

Neil McInnes of Pinsent Masons MPillay, the Singapore joint law venture partner of Pinsent Masons, said: "From a compliance perspective, the speech has wider significance. Developed economies with high-end property markets and strong financial centres face additional challenges from international corruption – namely, the by-product of bribery, money laundering.

"The prime minister's remarks reflect this. Sophisticated criminal enterprises will be invariably attracted to those international markets and economies in order to launder the proceeds of their overseas bribery. We can expect to see ever-greater co-operation between the law enforcement agencies [of the UK and Singapore]."

More light on the street

Trusts began in the Middle Ages, during the Wars of the Roses, when aristocrats went off fighting and wanted a legally settled way of leaving the management of their lands and other property in the hands of capable administrators, i.e. third parties. Cameron's initiative goes against this 600-year-old system of trusts and threatens to destroy the industry that has been created on the back of it in the Cayman and British Virgin Islands. People want to set up trusts for many reasons: for tax purposes (this is David Cameron's concern); to hide money from their wives in case their marriages collapse (Russian oligarchs and Saudis in London are active here); to hide money from corporates that want to take legal action against them and their assets; and to protect vulnerable members of a HNW family. All reasons have their relative merits.

On the other hand, it is probably right for a government to want to "light up another part of the street" and deny fraudsters yet another place to park their money quietly. Nevertheless, a true fraudster will use a false name, so it is questionable whether the new law will do precisely what Cameron wants.

* Alan Sheeley of Pinsent Masons is a civil fraud and asset recovery expert. He can be reached on +44 (0)207 054 2626 or at alan.sheeley@pinsentmasons.com