London property market turned into money laundering safe haven by inadequate supervision, MPs say

The committee said £100bn is being laundered through the UK each year

“Investment in London properties is a major route which tarnishes the image of the capital,” Keith Vaz said.

MPs have blamed the Government’s “totally inadequate” attempt to prevent the UK property market from being exploited by international money launderers, saying the UK has “laid out a welcome mat” to criminals.

The Home Affairs select committee said in a report that the current tools for detecting suspicious activity across the financial services sector and connected industries, such as real estate, are overloaded to the point of being “completely ineffective.

It called for an immediate and radical overhaul of the systems used to track seized assets.

Keith Vaz, committee chair and Labour backbencher, said the current proceeds of crime legislation have failed as £100 billion was being laundered through the county every year. This is the equivalent to the GDP of Ukraine, according to Vaz.

Last year there were 1.2 million property transactions in the UK. But those 2.4 million buyers and sellers generated just 355 suspicious activity reports, according to the National Crime Agency (NCA).

“Investment in London properties is a major route which tarnishes the image of the capital,” Vaz said.

“Supervision of the property market is totally inadequate, and poor enforcement has laid out a welcome mat for launderers and organised criminals,” he added.

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How is money laundering done through property?

The NCA system of reporting suspicious transactions brings together information from banks and law enforcement agencies. It is overwhelmed with nearly 382,000 reports per year, yet it was designed to manage no more than 20,000.

“This has rendered the whole system a futile and impotent weapon in the global fight against criminal financing, with no indication from the Home Office as to when a new state of the art system will be purchased,” Vaz said.

Henry Pryor, RICS and housing market commentator, said in his opinion it was “without question” that London property market was a destination for laundered money.

“I would say that if, for example, the buyer of a property was the second son of a world leader in a country in the middle of South America—how does he have £8 million to buy a flat in Mayfair—personally I would be suspicious,” Pryor said.

“But it does not seem that my professional colleagues are as sceptical as I am, which is unfortunate,” he added.

A spokesman for the NCA admitted the system was “not effective or efficient”, but the organisation is awaiting a Home Office review before deciding how to updatetheir reporting system.

A Home Office spokesman said: “We are committed to attacking criminal finances, making it harder to move, hide and use the proceeds of crime, as set out in the Serious and Organised Crime Strategy.

“The Government seized a total of £1.2 billion from criminals between April 2010 and March 2016, with more assets recovered in 2015-16 than ever before.”

Some 36,342 properties in London have been bought through hidden companies in offshore havens, according to a comprehensive study carried out into the long-suspected money laundering route through central London real estate, by Transparency International, an anti-corruption organisation.

While a majority of those will have been kept secret for legitimate privacy purposes, vast numbers are thought to have been bought anonymously to hide stolen money, the organisation said.