Treasury Committee chair, Nicky Morgan, has confirmed claims have been made that the UK, in particular the London property market, was attracting the financial proceeds of overseas crime and corruption. She said:
“It has been claimed that the UK, particularly the London property market, is becoming a destination of choice to launder the proceeds of overseas crime and corruption – so-called ‘dirty money’.”
Anti-corruption group, Transparency International, alleged in March that London had ‘routinely been the choice destination for Russians with suspicious wealth to move’. The UK’s ‘relaxed approach to regulation’ and offshore secrecy meant criminals had little trouble bringing dirty money into the UK.
The Treasury Committee quoted figures claiming that £4.4 billion of UK property may have been purchased using suspicious wealth – £880 million of which, more than a fifth, it says has come from Russia.
However, the Russians are not the only nationality under the corruption spotlight – buyers from the United Arab Emirates have spent £1.7 billion of suspicious wealth on UK property, putting Russians in second place. The ‘Paradise Papers’ this month highlighted the investment of drug money in the London luxury property market by Ukrainian criminals .
According to Knight Frank, only 3% of prime central London property was bought by Russians in 2017 – a far cry from the 20% of homes valued at over £10 million that they purchased in 2013.
How will London’s luxury property market fare in the face of Russian fallout?
Following recent tensions between London and Russia, the government has announced it will review the visas of hundreds of Russians living in the UK. The focus will be on those who arrived in the UK between 2008 and 2015, under a Tier 1 visa. The Tier 1 (entrepreneur) visa category enables wealthy individuals (from all countries) to obtain a visa into the UK. They need only show they have access to minimum ‘investment funds’. The largest number of applications come from Russia and China every year.
A new policy of ‘Unexplained Wealth Orders’ will enable suspicious assets in the UK to be seized until the owner proves otherwise. The policy will put London’s high end property market in the spotlight, with greater scrutiny over luxury homes, private jets and the funding of terrorism.
It is thought that the focus on Russians may drive some away from London, potentially flooding the market with luxury homes for sale.
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