EUROSCOPE. Realty bites: UK’s murky property world

Among the startling revelations of the 2016 Panama papers — published by the Guardian and other newspapers — was the fact that 2,800 companies appeared on a list of overseas property owners held by Britain’s Land Registry for properties worth over £7 billion.

The revelations highlighted the impervious nature of Britain’s property sector, whose rules currently allow the ultimate owners of properties to remain undisclosed, allowing the sector to act as a vessel to hide stolen wealth from abroad.

In the immediate aftermath of the Panama Papers, and concerns over money laundering through Britain’s property market, then Prime Minister David Cameron promised to introduce a public register of beneficial ownership that would cover companies that already owned property in the UK as well as those who intended to acquire new properties. It was one of the ways “we make sure that plundered money from African countries cannot be hidden in London,” he told MPs at that time.

Just under two years on, Cameron’s pledge remains unfulfilled: The London property market remained “highly vulnerable” to corrupt wealth inflows, Transparency International warned in a report published last year. The report estimated that around £4.2 billion worth of properties in the capital alone had been bought with “suspicious wealth” (that is to say with funds from individuals who were facing corruption allegations or had been convicted of corruption related charges).

With the figure relying just on open source material, the campaign group believes the real figure is far higher. Across the UK as a whole, over 86,000 properties are owned by companies incorporated in secrecy jurisdictions, according to campaign group global Global Witness, and were on the increase in some parts of the country in the past couple of years, despite the government’s pledge.

The issue has managed to stay off the agenda, in part, because it’s not been recognised as a domestic issue — despite the sizeable impact it is believed to have on the domestic property market.

Investment trap

Moreover, the government’s priority on attracting investment has worsened the situation, argue campaigners, including Transparency International. The group believes that in the first seven years of the existence of a new Tier 1 “investor” scheme — run under both Labour and Conservative administrations and which allowed investors making sizeable investments in the country to gain permanent residency more speedily — sufficient checks were not carried out.

“Over 5,000 individuals from countries with endemic corruption came to the UK during the blind faith period, with little in the way of checks on their sources of wealth or criminal records,” said TI in a report published last year. The level of investment through this channel fell dramatically after stronger AML checks were built in, they noted, adding further weight to their case that the route offered an ideal conduit for corrupt money to be laundered into the UK.

During an evidence session to the House of Commons Foreign Affairs committee earlier this week several witnesses spoke of the lack of a serious response to date to the movement of corrupt money, particularly, from Russia, through London — as a result of a combination of factors including the eagerness to do business in the country.

In the past month, London’s role as repository of dodgy wealth from across the world — and its potential impact on security — was back in the limelight following the poisoning of former double agent Sergei Skripal and his daughter Yulia in Salisbury.

“We must... expose the flows of ill-gotten cash between the Russian state and billionaires who become stupendously rich by looting their country and subsequently use London to protect their wealth,” said Labour Party leader Jeremy Corbyn earlier this month of the action he believed Britain needed to take in the wake of the poisonings.

“Money laundering should be a foreign policy issue not just criminal,” Roman Borisovich, a banker turned anti-corruption campaigner behind Kleptocracy Tours of London, told the select committee earlier this week.

Campaigners have been encouraged by some changes in recent years, including most notably the introduction earlier this year of Unexplained Wealth Orders (UWOs), that put the onus on individuals in certain circumstances to explain the origin of their wealth or face asset seizures through civil courts. Since then two UWOs have been secured, with high hopes for their potential in the future.

Vincent Cable, leader of the Liberal Democrats suggested that the power could be used against senior figures in the Kremlin including First Deputy Prime Minister Igor Shuvalov, who owns property worth millions of pounds in central London, well beyond the reach of his official salary or declared wealth.

More teeth

Last year also saw the introduction of so-called Magnitsky powers, named after the Russian accountant who exposed corruption and died in detention (and after whom a global campaign to encourage states to introduce laws allowing those suspected of human rights violations to have their assets seized and denied visas resulted in powerful US legislation).

Those introduced in Britain, however, were far more limited than in the United States, but now the government is set to back a Labour party effort to toughen these powers through legislation on sanctions and money-laundering going through Parliament.

Whether this will be enough to change things fundamentally remains to be seen. “This money is deeply embedded in our system…since the 1950s,” warned Oliver Bullough, an author and transparency campaigner, who believed billions worth of wealth were laundered through the city of London each year.

Britain’s response to date on Russia — including the expulsion of diplomats — would do little to tackle the fundamental problem, argued Borisovich.

“Instead of going after where it hurts” and tackling kleptocracy, the expulsion of 23 diplomats meant that 123 oligarchs could “have a party” because their influence and place in society had been preserved, Borisovich told the committee.

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