It has recently been revealed that property in London has been used for years by foreign criminals as a way to launder their money. Following a report from Transparency International and a feature on Channel 4, it is now clear that this may be one of the reasons for the ever-increasing price gap between in properties in London and the rest of the UK. On Tuesday 28th July, David Cameron promised to act against these corrupt property buyers who own an estimated one in ten properties in Westminster. Here at Prideview Properties we’re in the property business too, and are equally appalled as you are at London being used for money laundering so in this article we’re going to look at what exactly was going on and how it has affected the market.
How it’s done
The first step in the chain is the crime itself. Usually the money comes from corrupt officials who have stolen money from the government by stating that a transaction they are managing costs more than it does, and pocketing the leftover money.
They can’t just buy property with this straight away though as that would be too traceable, instead they need to have a network of offshore companies created. The accountant managing the deal will create the companies in a way that the criminal cannot be identified through any transaction.
The money is then funnelled through these companies, crossing jurisdictions as it goes to make it very difficult to follow, in a process called ‘layering’. Finally, a property in London is bought by one of these offshore companies and the money is stored in an asset that is unlikely to lose much value.
How it has affected the market
Usually in a property market buyers will be trying to pay the lowest they can on a house, pulling down the average prices for property. With these money laundering purchases the aim is to store as much money as possible in a property asset so the prices are pulled up rather than down. This increase in average price has a ripple effect on all the properties in London and even through to the rest of the UK. The increase in price may seem beneficial for buyers but it also means that less people will be able to buy property.
What Is Being Done
David Cameron has this week stated that actions will be taken to stop the use of London as a “money laundering haven”. The government will publish Land Registry data later this year to reveal which foreign companies own property in England and Wales to make it clearer which properties are being bought legitimately and which aren’t. Alongside some other measures that he hopes will help to alleviate worldwide corruption, this should hopefully end the use of London for money laundering.
Of course, not all property transactions in London are corrupt and we are there to help with the ones that aren’t. As commercial property agents in London we’re here to deliver a great service to people looking for a home in London or the surrounding areas, so if you’re in need of one don’t hesitate to contact us on 0208 863 8680 and a member of our friendly team is happy to help.