Financial Transparency Coalition

By: Scott Edwards, Communications Officer for Transparency International – United Kingdom

This piece is cross-posted from the blog of Transparency International

Boris Johnson’s call for new homes in London to be sold first to Londoners, “not to oligarchs”, made headlines this week.

The Mayor of London making this demand at the Conservative party conference in Birmingham highlights a growing acknowledgement that a vast number of properties in the city are being used as safe investments by the world’s mega-wealthy.  In fact, foreign buyers bought up to 75% of new homes in central London over the past year, and foreign buyers reportedly accounted for 49% of all properties above £1m. £7bn of foreign investment was spent on high-end London homes in 2013.

But what Johnson must consider when addressing the overheated top-end of London’s property market is the ease with which an overseas buyer can invest in a London property using stolen assets – the proceeds of corruption.

Currently, corrupt politicians, officials and businesspeople are able to launder money through the UK, buying much sought-after London lifestyles at very little personal risk. In London’s most exclusive postcodes, property is often bought using anonymous shell companies based in off-shore jurisdictions, such as the British Virgin Islands or the Channel Islands, with not even the Land Registry knowing who thereal owner is.

If corrupt individuals are able to buy London properties using stolen public funds, London represents one half of an equation that allows corruption to flourish. Money originally intended for health or education in a developing country is instead transferred to pay for an empty London property that slowly accumulates wealth for the buyer.

Encouragingly, the UK has committed to establishing a public register of company beneficial ownership and to increase powers to seize criminal assets. But more needs to be done, particularly in the British Overseas Territories and other ‘secrecy havens’.

Estate agents in the UK aren’t reporting suspicions of money laundering at anywhere near the rate they should be. Out of all ‘suspicious activity reports’ in 2013, estate agents only account for 0.07% of the total. This sector in the UK needs to wake up to its responsibilities.

In December last year, we launched a report, Closing Down the Safe Havens: Ending impunity for corrupt individuals by seizing and recovering their assets in the UK, that highlights the blocks in the system which are preventing stolen funds being identified, frozen and seized.

The TI movement has also launched a new campaign, Unmask the Corrupt, which has kicked off by asking G20 countries to make it impossible for the corrupt to hide their identify behind secret companies. We urge everyone reading this blog to sign up: unmaskthecorrupt.com.

And, if Johnson really wants to put Londoners first, we urge him to join TI in calling for more to be done to prevent corrupt money being invested in London’s properties. Londoners deserve better than their city being used as a cleaning closet for stolen money.

Image used under Creative Commons license / Flickr User Ronnie MacDonald