Attempts to crack down on oligarchs’ empty mansions could be blocked by “loopholes” in a new law rushed through earlier this year.

Transparency campaigners have warned council chiefs they could face “legal hurdles” due to the “problematic” Economic Crime Act, introduced in March after Russia’s invasion of Ukraine.

Westminster Council on Wednesday said it would launch an offensive on dirty money and poor tax conduct, hoping to use Compulsory Purchase Orders (CPOs) to seize empty homes whose owners have failed to pay council tax.

But legislation introduced swiftly this year to help the government more easily identify overseas owners of properties is riddled with “get-out clauses,” said Susan Hawley, executive director of Spotlight Corruption: “There was a lot of concern when it was launched that there were serious loopholes.”

The act for the first time requires overseas owners of UK assets to declare the true, beneficial owners or managers of those assets, with “severe sanctions” for those who do not comply.

But there is no requirement to declare shares of a property below 25%, meaning selling up a portion would render it invisible to the authorities.

“Westminster Council have clearly identified a big problem,” said author and anti-corruption expert Oliver Bullough. “But I'm afraid if they think that they're going to be able to take away oligarchs’ properties, then they've got a spectacular fight on their hands.

“The National Crime Agency has never succeeded, so I doubt Westminster Council would be likely to [take the homes of oligarchs]. The problem is the fact that the law enforcement agencies don't have anything like they need to do the job that they want to do. They can’t afford to take on oligarchs. That’s the basic underlying problem.”

Reforming Companies House, which holds the list of properties, is also central to how effective the register will be in clamping down on money laundering. Currently, the database of companies registered in the UK is not verified, leading to fraudulent companies registering and little oversight over its entries.

Waiting list

Westminster Council hopes its crackdown could be used to tackle the borough's homelessness crisis – an issue campaigners say is exacerbated by empty homes.

According to the council’s tax data, there are 3,251 empty properties in the borough. Of those, 1,114 of those have been empty for more than six months, while 496 have been empty for more than one year. Crucially, it is not known how many of these are owned by oligarchs, which is where the Economic Crime Bill is supposed to come into play.

More than 4,000 people are on the waiting list for a home in Westminster.

“In a city that's responsible for two-thirds of the nation's homeless families, it's a moral outrage,” Chris Bailey, national campaign manager at Action on Empty Homes said. “There's a lot of work to be done.”

The council, which has also focused its attention on a network of potentially tax-evading American sweet shops in central London, came under Labour rule for the first time in 58 years in May.

“It is really welcome that people are starting to think about how we alter the legal mechanisms by which we can legitimately start to see some of this frozen wealth,” said Hawley.

“[But] there'll be a huge backlash. It’s likely to be quite fraught with legal hurdles.”