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I took a “Kleptocracy tour” around London and discovered the corruption capital

A sightseeing trip around central London properties revealed just how much dirty money there is swimming around the city.

London is a globally leading city, bustling with culture and educational capital, a booming economy, and abiding by the rule of law. But, combined with regulations allowing for the anonymous purchase of real estate, it’s for these reasons that the UK’s capital is one of the world’s largest laundromats, a city where money from corruption is being poured into property.

The scale of money laundering

The amount of money laundered through the UK is estimated to be at £48bn, or two per cent of GDP, while it estimated £120bn worth of UK property is owned by offshore entities and up to 36,000 properties in London exist where offshore havens were used to hide the true buyers’ identities.

That’s important, given the comprehensive report released last year called Corruption on Your Doorstep, issued by Transparency International, which found that “75 per cent of properties whose owners are under investigation for corruption made use of offshore corporate secrecy to hide their identities”.

Such is the extent of the laundering that we don’t know who owns nearly one in ten houses in Westminster. In the City of London we don’t know who owns 4.5 per cent of properties.

How they get away with it

“This is a real problem,” Simon Farrell QC, an expert in money laundering and corruption, says. “The only reason for corporate ownership is to disguise the true ownership and for those with dubious funds and who have avoided tax to shelter profits in London, a safe haven where the rule of law prevails. It’s a disgrace.”

So now, “London is now the premier location worldwide for corruption-based money laundering,” says Ben Judah, author of a book about Russia called Fragile Empire (2013).

And that’s not just bad because the money could be spent by the government on building schools, hospitals, roads, or in developing countries. It’s also pricing Londoners out of their native city, says Roman Borisovich, an anti-corruption campaigner with links to the Russian opposition leader Alexey Navalny. He organises the guided Kleptocracy Tours of London.

It’s not just a bunch of anti-corruption fanatics who put forward his view. Donald Toon, director of the National Crime Agency’s economic crime command – otherwise known as Britain’s FBI – last year warned: “I believe the London property market has been skewed by laundered money. Prices are being artificially driven up by overseas criminals who want to sequester their assets here in the UK.”

He was alarmed by the sheer number of homes registered to complex offshore corporations, some of which may have been bought with laundered money.

These offshore corporations are registered in havens, such as the British Virgin Islands, where details about company shareholders are not collected, making it nearly impossible to discover who is veiled behind them.

Given that the owners are hidden, it can’t be said that all properties purchased are being bought with the proceeds of corruption. Yet, given nearly 90 per cent of foreign company-registered properties in London are located in offshore havens, Transparency International says it is likely.

That’s why Transparency International wants offshore havens to introduce their own registers of beneficial ownership. That’s where property rights belong to a verifiable known person even though the legal title of the property nominally belongs to another person.

It also calls for the UK to introduce a register of beneficial ownership for properties owned by foreign companies in the UK, as only then will there be greater transparency around who is investing in the property market and where their funds come from.

Labour’s London mayoral candidate Sadiq Khan is calling for the government to make all property ownership in London transparent, pushing for all foreign companies to be as transparent as UK companies over their ultimate beneficial ownership if they wish to hold property titles in the UK.

Will anything be done?

The government and property industry say they will crack down on the issue. Mark Hayward, who runs the National Association of Estate Agents says estate agents are meant to submit suspicious activity reports if they notice something does not seem right.

“The industry is largely doing what it can to make these checks on individuals,” he says. “But the real difficulty is that they are unable to trace how and where the illegal funds come from and where they are going.”

Last July, speaking in Singapore, David Cameron called transparency key in tackling corruption, as “the corrupt, the criminals, the money-launderers – they need anonymous company structures to hide, to move and to access their money”.

He added: “We need to stop corrupt officials or organised criminals using anonymous shell companies to invest their ill-gotten gains in London property, without being tracked down.”

To the Prime Minister’s credit, Robert Barrington, director of Transparency International UK, said legislation has been passed by his government that means all UK companies need to declare from June 2016 who their beneficial owners are. “But this had already been announced before the Singapore speech. It’s not new, even though it’s good.”
Hayward believes that, since Cameron’s speech, HMRC and the NCA have upped their game in terms of policing his sector. But he says nothing major has happened since Cameron’s pledges.
Barrington laments: “The Prime Minister announced in July last year they would consult over whether foreign companies that own properties in the UK should have to say who the beneficial owners are, but the consultation was only launched last week.  After the consultation there may need to be legislation. The feeling is that this is not quite being treated with the sense of urgency it warrants.”
These consultations have only just been launched, almost eight months after the speech, with no action yet taken. That effectively means people can still hide behind foreign corporations and buy property with dubious funding.
When I asked the Cabinet Office about its progress, its spokesperson would not comment on when policy could be introduced, instead saying that it is “committed to the measures laid out in the Prime Minister’s speech”.

“Hopefully the government will do something about it very soon to avoid the embarrassment of admitting that nothing has happened in almost a year at the time of the global Anti-Corruption Summit it is planning to hold in London in May 2016,” Borisovich says.

Otherwise London will continue to act as a paradise for money laundering, where poorer countries get ripped off and Londoners are priced out of the capital.

Photo: Getty
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Like it or hate it, it doesn't matter: Brexit is happening, and we've got to make a success of it

It's time to stop complaining and start campaigning, says Stella Creasy.

A shortage of Marmite, arguments over exporting jam and angry Belgians. And that’s just this month.  As the Canadian trade deal stalls, and the government decides which cottage industry its will pick next as saviour for the nation, the British people are still no clearer getting an answer to what Brexit actually means. And they are also no clearer as to how they can have a say in how that question is answered.

To date there have been three stages to Brexit. The first was ideological: an ever-rising euroscepticism, rooted in a feeling that the costs the compromises working with others require were not comparable to the benefits. It oozed out, almost unnoticed, from its dormant home deep in the Labour left and the Tory right, stoked by Ukip to devastating effect.

The second stage was the campaign of that referendum itself: a focus on immigration over-riding a wider debate about free trade, and underpinned by the tempting and vague claim that, in an unstable, unfair world, control could be taken back. With any deal dependent on the agreement of twenty eight other countries, it has already proved a hollow victory.

For the last few months, these consequences of these two stages have dominated discussion, generating heat, but not light about what happens next. Neither has anything helped to bring back together those who feel their lives are increasingly at the mercy of a political and economic elite and those who fear Britain is retreating from being a world leader to a back water.

Little wonder the analogy most commonly and easily reached for by commentators has been that of a divorce. They speculate our coming separation from our EU partners is going to be messy, combative and rancorous. Trash talk from some - including those in charge of negotiating -  further feeds this perception. That’s why it is time for all sides to push onto Brexit part three: the practical stage. How and when is it actually going to happen?

A more constructive framework to use than marriage is one of a changing business, rather than a changing relationship. Whatever the solid economic benefits of EU membership, the British people decided the social and democratic costs had become too great. So now we must adapt.

Brexit should be as much about innovating in what we make and create as it is about seeking to renew our trading deals with the world. New products must be sought alongside new markets. This doesn’t have to mean cutting corners or cutting jobs, but it does mean being prepared to learn new skills and invest in helping those in industries that are struggling to make this leap to move on. The UK has an incredible and varied set of services and products to offer the world, but will need to focus on what we do well and uniquely here to thrive. This is easier said than done, but can also offer hope. Specialising and skilling up also means we can resist those who want us to jettison hard-won environmental and social protections as an alternative. 

Most accept such a transition will take time. But what is contested is that it will require openness. However, handing the public a done deal - however well mediated - will do little to address the division within our country. Ensuring the best deal in a way that can garner the public support it needs to work requires strong feedback channels. That is why transparency about the government's plans for Brexit is so important. Of course, a balance needs to be struck with the need to protect negotiating positions, but scrutiny by parliament- and by extension the public- will be vital. With so many differing factors at stake and choices to be made, MPs have to be able and willing to bring their constituents into the discussion not just about what Brexit actually entails, but also what kind of country Britain will be during and after the result - and their role in making it happen. 

Those who want to claim the engagement of parliament and the public undermines the referendum result are still in stages one and two of this debate, looking for someone to blame for past injustices, not building a better future for all. Our Marmite may be safe for the moment, but Brexit can’t remain a love it or hate it phenomenon. It’s time for everyone to get practical.