They may not realise it, but criminal laundering is costing ordinary Londoners dearly
It’s one of those crimes which you’re unlikely ever to see or experience personally, but criminal money laundering is costing ordinary Londoners dearly.
A recent study by Transparency International found that over 36,000 London properties are held by companies operating in offshore tax havens. Owing to the secretive nature of these havens we know very little about the true owners of the properties or, just as importantly, where the money used to purchase them came from to begin with.
There are many legal, if morally questionable, tax perks to operating from an offshore tax haven. But for criminals, the ability to launder criminal cash is the big attraction. Yet in order to make it work they need to be dealing with big amounts, which is where high valued property comes in.
Evidence shows that the average price of a property under criminal investigation in the UK is £1.5m with some worth up to £9m. It’s clear that criminals are targeting the most expensive properties to harvest their ill-gotten gains.
The problem for everyday Londoners, other than the criminality, is the knock-on effect. Artificially inflated prices in central London ripple out across the capital, pushing up prices and making many homes unaffordable for average earners.
Yesterday the prime minister announced a toughening up of the rules around foreign purchases, by ordering the Land Registry to publish details of companies who own property. While this is a good first step, there is much further to go. The message needs to go out loud and clear from both the mayor and government that money laundering and financial crime will not be tolerated.
Those 36,000 properties amount to a total area of 2.25 square miles; that’s far bigger than the entire City of London financial district. In some areas, for example the City of Westminster, Transparency International found that almost one in ten properties were owned by companies registered in an offshore secrecy jurisdiction. In high value areas of the capital this is not a new phenomenon.
In the past we’ve raised concerns about money laundering, only to be dismissed and brushed off by Boris Johnson. When we asked him what he thought of the Transparency International report on money laundering he said it ‘asserted that it was ‘likely’ that that there was a link between ‘corrupt capital’, overseas investment and rising house prices but did not produce any evidence to suggest the nature and scale of any such relationship’.
The prime minister obviously disagrees, as it was this report which inspired his rule change.
Publishing details of foreign companies investing in property is a good start but we really need to see increased efforts to identify and prosecute offenders, as well as pressure put on estate agents to carry out more thorough checks when selling top-price homes.
Without these steps the sky-high prices illegal launderers can pay for London properties will continue to add artificial upwards pressure to the housing market, putting home ownership further and further out of reach for ordinary people.
It’s time the mayor converted to the cause, as the prime minister has eventually seen fit, and makes clear that money laundering simply will not be tolerated in the capital.
Tom Copley is a Labour Londonwide Assembly Member and the Labour Group Housing Spokesperson. Follow him on TwitterLike this article? Sign up to Left Foot Forward's weekday email for the latest progressive news and comment - and support campaigning journalism by making a donation today.