The Brexit vote must be manna from heaven for those seeking to hide their illicit gains in London. Busy with all their posturing and negotiations, politicians will have no time to curtail the criminals’ activities.
The same goes for the media and the public: they are more likely to focus on the ups and downs in Britain’s withdrawal from the European Union than change the conditions that have made London such an attractive place for the world’s corrupt.
And yet, this is one of the biggest causes of the housing crisis in the capital: rich foreign “investors” buying properties with their more or less licit wealth and leaving them empty — a phenomenon that has been dubbed “buy-to-leave”.
A recent report by Transparency International (TI) has not been receiving the attention it perhaps deserves. It shows the extent to which London property has been used as a safe haven by shady characters: more than £4.2 billion worth of properties were bought with suspicious wealth, according to its findings.
“There is now a wealth of evidence to show that UK real estate, particularly in London, is attracting corrupt officials and businesspeople who have stolen money from some of the most impoverished and repressed countries in the world,” the report says.
Transparency International looked at Land Registry data for 14 luxury developments that had 2,066 future homes. It found that almost 80% were bought by investors from abroad, with 40% of the properties sold to individuals from jurisdictions at high risk of corruption, or to companies based in secrecy havens.
Off-plan purchases — with investors buying properties before completion, as an investment — “pose a heightened money laundering risk due to the potential opacity of the transactions and the speed at which they can occur; given the nature of the buyers of these properties the risks are even greater.”
This model supported the construction sector during the financial crisis of 2008, aided by various government subsidies to prop up house prices, such as the Help to Buy programme. But, in the opinion of the authors of TI’s report, it could have led to an over-supply of high-end properties coming to the market.
“A symptom of this oversupply is the current slowdown in luxury property purchases; this provides strong incentives for sellers to push through deals with less rigorous money laundering checks being applied to the buyers,” it warns.
TI carried out a survey of Londoners and found that 54% of respondents believe wealthy foreign investors were one of the leading factors behind rising house prices; 64% believe the foreigners’ appetite to invest in London real estate was either driven by instability in the investor’s home country or a desire to launder money.
Officials in Prime Minister Theresa May’s government have already said the UK is ready to turn into a “tax haven” of some sort if it doesn’t get a good deal from the EU after Brexit.
But as TI’s report shows, encouraging foreign criminals to “invest” their spoils in London will probably not be as appealing to voters as some in the Tory party believe.