Money Laundering in the U.K.

Money Laundering in the U.K. and its effect on the London Property market.

Money Laundering is the process of making illegally obtained money appear legal.

How money laundering occurs-

  • Money is obtained through illegal means.
  • It is covertly reintroduced to the financial system.
  • Multiple complex transactions occur to disguise the moneys’ true origin.
  • The money can then be used to purchase secure assets.

 

Money Laundering in the U.K.-

In 2015 1.2 million property transactions took place in the U.K. But from those 2.4 million buyers and sellers only 355 suspicious activity reports were generated according to the National Crime Agency.

The National Crime Agency system of reporting suspicious transactions brings together information from banks and law enforcement agencies. It receives approximately 382,000 reports each year, yet the service was only designed to deal with 20,000.

 

 

Money Laundering in the London Housing Market-

  • It is considered highly likely that the influx of corrupt money into the housing market has pushed up prices, some would even go as far to say that prices are artificially being driven up by overseas criminals who want to sequester their assets in the U.K.
  • Since 2014, £180 million of U.K. property has been subject to criminal investigation according to Transparency International data from 2015.
  • Most of these properties were bought using anonymous shell companies based in off-shore tax havens such as the British Virgin Islands.
  • Land Registry data shows that 100,000 in England and Wales are owned by overseas companies.
  • According to Transparency International data, almost 1 in 10 properties in Kensington and Chelsea is owned through a ‘secrecy jurisdiction’.
  • The National Crime Agency believes that hundreds of millions of pounds are laundered through the U.K. every year although it is not clear how much criminal proceeds are invested into the property market.
  • Since 2006 £100 billion of hidden inflows have entered the U.K.
  • Transparency International claim that over 40% of apartments in a tower block on the Southbank Place development, next to The London Eye, has been bought by companies that are registered in The British Virgin Islands.

 

 

Faulty Towers Report (March,2017): Transparency International

Key Findings-

  • Corruption causes increased instability abroad which leads to ‘crisis capital’ being placed in safe havens like London.
  • House prices are affected by the influx of illicit wealth and crisis capital into the U.K. as often it is used to purchase luxury assets such as property, this has increased demand in the London housing market particularly at the top end; but the effects this increased demand creates effects the rest of the London housing market.
  • New build developments are now built in prime locations targeting wealthy international investors and thus the demand for affordable homes is not being met.

To see the full report: http://www.transparency.org.uk/publications/faulty-towers-understanding-the-impact-of-overseas-corruption-on-the-london-property-market/

London Properties bought by overseas companies

AreaNumber of Properties
Kensington and Chelsea3,583
Westminster6,527
Lambeth1,154
Camden1,273
Tower Hamlets1,120

 

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