London’s property market is being flooded by
corrupt offshore money, with billions of pounds being laundered by
foreign criminals and corrupt government officials, according to a report
by Transparency International (TI). The scale of corruption in the city
has led media reports to call London the world capital for money
laundering.
Over 36,000 properties in London have been bought through
secret companies located in offshore havens such as the British Virgin
Islands and the Isle of Man, according to TI. While the report
acknowledged that most of the properties were bought in this manner for
legitimate privacy reasons, an unknown number of them are thought to
have been bought anonymously to
hide stolen money. About 75 percent of
properties under criminal corruption investigations are held by secret
offshore companies, a practice that one investigator described as being
“like putting money in a Swiss bank – they have become ubiquitous for
the corrupt,” The Guardian reported.
Anonymous companies in locations like the Virgin Islands
can purchase and sell houses in the U.K. without disclosing the buyer's
identity. Estate agents who are responsible for brokering the
transactions only need to conduct money laundering checks for the
seller, meaning that buyers face little to no scrutiny. The Metropolitan
Police figures show that the total value of properties investigated in
the last decade amounted to over 180 million pounds ($276 million), TI
reported.
The massive influx of corrupt money has reportedly
distorted London’s property market by driving up prices, and causing a
“widespread ripple effect down the property price chain and beyond
London,” according to the report. The average asking price for a
3-bedroom apartment in London has increased by over 300,000 pounds since
2007, according to London Property Watch.
Robert Barrington, TI's executive director, said: “This has
a devastating effect on the countries from which the money has been
stolen and it’s hard to see how welcoming the world’s corrupt elite is
beneficial to communities in the UK,” The Independent reported.
Many of these properties reportedly remain unoccupied, with
over 700 “ghost mansions” worth 3 billion pounds lying unused, TI
reported. In 2014, The Guardian investigated
“Billionaires Row,” a stretch of derelict, unoccupied mansions
collectively worth 350 million pounds that one property developer called
"one of the most expensive wastelands in the world.” They found that 20
of the mansions were held offshore and registered in tax havens.
Much of the money comes from the developing world, with 90
percent of newly-built luxury properties having been bought by overseas
buyers. Of these, buyers from Russia, the Middle East, North Africa and
China were most highly represented, according to a report by real estate
firm Savills, cited by TI.
According to Jon Benton, director of operations of the
Metropolitan Police’s anti-corruption unit, the strength of London’s
legitimate property market combined with a lack of international
oversight makes it attractive for corruption and laundering. “Properties
that are purchased with illicit money, which is often stolen from some
of the poorest people in the world, are nearly always layered through
off-shore structures,” he told TI.
TI criticized the British Overseas Territories for not
heeding a call from Prime Minister David Cameron last April to enforce
transparency among the owners of locally-based companies and trusts, and
urged the U.K. to act unilaterally in the absence of political will
from tax havens.
A spokesman for the States of Jersey, one of the tax havens
named in the report, told The Guardian it was fully cooperating with
law enforcement authorities. “We know the beneficial ownership of all
companies incorporated in Jersey and that information is available to
law enforcement and tax authorities on request.
“Therefore, there is no reason why the UK police, using the
appropriate channels, would not be able to get information on the
beneficial owners concerned.”
TI recommended that all foreign companies be required to
reveal the names of beneficiaries before buying property in the U.K. and
for estate agents to be required to conduct checks on purchasers as
well as sellers. "In order to reduce the risk that the UK is used as a
safe haven for corrupt money, we want transparency to be established
over who owns the companies that own so much property in Britain," TI
said, in an online post.
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