In a recent speech, British Prime Minister David Cameron again slammed corruption and those who tolerate it, and called for global political leaders to talk more about the “cancer of corruption” and how to combat it.
“We just don’t talk enough about corruption. This has got to change. We have to show some of the same courage that exposed Fifa and break the taboo on talking about corruption,” he said.
Cameron could lead the way by starting looking right under his nose or, as anti-corruption organisation Transparency International says, on his doorstep. Quite literally.
In a report earlier this year, Transparency International warned that the globally corrupt find a welcoming home in the UK, more specifically in London property.
The report has identified 36,342 London properties, covering a total of 2.25 square miles, which are held by companies registered in offshore havens.
While it is impossible to say for sure how many of these properties are ultimately owned by people who have gained their money following acts of corruption, it is known that many of those use offshore havens to hide the proceeds of their deeds.
Why is London so attractive for the world’s corrupt? Transparency International reckons there are several reasons that make it very easy for large sums of money to be laundered in London property.
Luxury properties in the UK offer “a much sought-out badge of wealth and respectability” while allowing the corrupt to launder considerable amounts.
“A property can also produce further income by letting it or even used to conveniently launder even more money by signing bogus lease contracts with fake tenants,” the report says.
And the ever-rising prices do not discourage the criminals, on the contrary. “The higher the prices, the more money can be laundered into property and through property to other assets.”
The countries with the highest corruption perceptions in Transparency International surveys – situated in Eastern Europe, Middle East and North Africa and Asia – also figure high among buyers of newly built luxury properties in London.
One of the reasons why it is so easy to hide dirty money in UK property is because the Land Registry does not record the beneficial owner of a property that is being bought, instead recording only the name on the “title” – the ownership document.
Easy to hide in London property
Somebody wishing to keep the ultimate owner’s identity secret could create a company in the British Virgin Islands, where the authorities do not collect data about the owners of such companies, and use it to buy a property in the UK.
“Such companies can be created in less than 48 hours from any location in the world for as little as $1,000 and in some cases, an identity document is not even required,” the Transparency International report emphasized.
Such companies are sometimes exempt from capital gains taxes, stamp duty and succession taxes. British overseas territories also benefit from the fact that their judicial system is based on English law and that the UK government guarantees political stability.
The TI research has found that of all the foreign company-owned properties in London, more than a third (33.96%) are registered in the British Virgil Islands, followed by Jersey (14%), Isle of Man (8.5%) and Guernsey (8%).
“Property in the UK held by companies registered in secrecy jurisdictions enables anti-money laundering checks to be bypassed with relative ease and frustrates criminal investigations into grand corruption,” the report said.
Of course, the simple fact that a property is registered to a company abroad does not automatically mean the money paid for the property has been laundered. But the fact that it is so difficult to identify the ultimate owner facilitates this.
However, both the UK government and the UK public are strangely relaxed about this.
A petition has been circulating for more than two months asking for the legislation to be changed so that beneficial ownership of UK property is disclosed to the Land Registry. At the time of publication of this article, fewer than 2,000 people had signed it.
As for the government, it has been happily subsidising demand for property in an already red-hot property market, all the while blaming immigration for a shortage of housing. At the same time, it has made no progress towards ensuring that London residential property stops being used as a safe haven by the world’s corrupt.
Corruption abroad contributes to raising home prices in the UK, and raising home prices bring votes. However, the election campaign is now over. With London home prices at record highs, it might be a good time for the government to set to work on changing the capital’s shameful reputation as the refuge of choice for global money launderers.