Money-laundering: agents rapped for too few ‘suspicious activity reports’

A report from anti-corruption campaign group Transparency International says British estate agents reported only 179 suspicions of money laundering in a year.

In a far-reaching report covering many sectors of trading, TI says the real estate sector in the UK is particularly vulnerable to being used to launder the proceeds of corruption as it allows substantial sums to be ‘parked’ in the purchase of a single high-value asset – usually in prime London – and the funds can later be reinvested elsewhere.

In particular the report – called Don’t Look, Won’t Find – says: “Our recent research found that over £180m worth of property in the UK has been brought under criminal investigation as the suspected proceeds of international corruption since 2004, which was described by law enforcement authorities as ‘only the tip of the iceberg.’”

IT says estates agents have one of the lowest ‘Suspicious Activity Reporting’ records of any industry for the period for October 2013 to September 2014 – just 0.05 per cent of all SARs, representing a fall of 16.74 per cent from the previous year.

Critically, the group claims that a government analysis of SARs submitted by the property sector revealed that in a number of cases, activity was only reported once law enforcement authorities identified an interest to the reporter.

The report goes on to say the luxury new-builds in central London [many of them sold by high-end estate agents] are particularly associated with high levels of exposure to money-laundering.

It then goes on to list weaknesses in the UK regulatory regime for property: “Chief among these is that AML regulation for estate agents only requires due diligence checks on the seller, not the purchaser. The regime relies on lawyers to cover any estate agency risks, which ignores the risk of complicit lawyers. Weaknesses also include the lack of recorded sale price by the Land Registry; the historic lack of regulatory sanctions for AML breaches; and low levels of awareness of AML responsibilities within the sector.”

The report also speaks at length about the link between property purchase and offshore company secrecy.

It says: “The UK’s official record of corporate landholdings, maintained by the Land Registry, shows that there are over 36,000 properties in London held by companies registered to offshore secrecy jurisdictions, both residential and commercial, representing an estimated 2.25 square miles of London property.

“Out of all foreign-company-registered properties in London, the overwhelming majority (89.5 per cent) are located in secrecy jurisdictions, chiefly in British Overseas Territories and Crown Dependencies. More than a third are registered in the BVI (13,831 properties), followed by Jersey (5,960), the Isle of Man (3,472) and Guernsey (3,280).

“More than 1,000 London properties are owned by overseas companies registered in unknown locations. The City of Westminster, Kensington & Chelsea and the City of London have the highest ratio of properties registered to offshore secrecy jurisdictions. In general, the higher the average property price in a borough, the more likely it is to have a relatively large number of properties registered offshore.”

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