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Can we stop crooks laundering money in London?

Credit: Christopher Furlong / Getty

Credit: Christopher Furlong / Getty

September 12, 2018   4 mins

It’s not cheap to buy secrecy, not by ordinary standards. If you set up a company offshore, it will cost you hundreds of pounds – a British Virgin Islands vehicle is more like ÂŁ1,000 – and if you use that company to own UK property, you’ll be liable for a special “enveloped dwellings” tax of up to ÂŁ226,950 a year. However, if you don’t mind paying those fees, the secrecy you’ve bought is world class.

In this way, it’s easy for the rich and the powerful to hide their wealth behind shell companies, and thus buy protection from public scrutiny. In this way money-laundering operations are allowed to undermine the foundations of Western stability. In order to stop this happening, I think we should give them anonymity free.

The latest Government spreadsheet reveals that there are 96,693 properties owned by offshore companies in England and Wales, held everywhere from Abu Dhabi (five properties) and Alderney (44 properties) to Wyoming (19 properties) and Zimbabwe (three properties). The most favoured jurisdictions are of course the tax havens that everyone knows about – Panama, Switzerland, the Seychelles, Jersey, Luxembourg and the rest of them – but dozens of less likely countries appear on the list too.

This is not necessarily a bad thing, and it does not necessarily cost the exchequer money. The majority of those companies owning UK property will be entirely innocent: many investment funds prefer to hold their properties offshore, which is just how the globalised economy works. And they’re all paying their enveloped dwellings tax too.

But hiding among the pension funds and embassies are some very worrying people indeed. Take 28, Wilton Place, in Belgravia, for example. This is owned by Ocral Enterprises Ltd, of Panama, and the person who owns that company is a secret held by whatever lawyer created it. Media reports tell us that this was (or, perhaps, still is) the London home of Gamal Mubarak, son of the former dictator of Egypt, though other companies suggest it is owned by an Omani businessman.

If it is owned by the Mubarak family, that means this handsome terraced property, just a gentle stroll away from Hyde Park, was almost certainly bought with money stolen from the Egyptian people. And this house is not alone, other offshore-owned properties are linked to Russian politicians, Nigerian governors, illegal arms dealers, Kazakh ex-spooks, as well as thieves and crooks from all over the world.

The London property market is perhaps the single most favoured destination for kleptocrats to stash the money that they’ve stolen. Whole chunks of our capital city have become a scaled-up, multi-billion-pound version of the Kingsland Road electronics shops that specialise in selling iphones nicked from tourists in the West End. But at least police officers can keep an eye on these shops and, by watching who is going in and out, make a direct connection between the thief and his fence. The offshore holding companies, however, obscure what’s happening, and make law enforcement’s task far harder. Where ordinary crimes have just two phases – steal, then spend – kleptocracy gains an extra one. Before the kleptocrat spends the money he has stolen, he obscures his ownership of it: steal, hide, spend.

He steals a fortune in the country he rules, hides it offshore, then spends it in London. Perhaps as much as a trillion dollars are stolen every year from the world’s poorest countries in this way – money that could be spent on medicines, roads, education or security, but is instead going into high-end property, luxury goods and lawyers’ fees.

The world has a truly parlous record of tracking down this stolen wealth, confiscating it and returning it to its true owners. Kleptocrats can retain top-end lawyers, and fight through the courts in every jurisdiction they’ve use to obscure their fortune. Former Ukrainian prime minister Pavlo Lazarenko was arrested in the United States back in 1999, tried and jailed for corruption, and yet – almost two decades on – his assets are still out there hiding in the well-protected country of the mega-rich that I call ‘Moneyland’. If even the US authorities struggle to extract stolen assets from behind Moneyland’s offshore ramparts, it’s not surprising less-resourced countries can’t either.

For every $1,000 stolen each year, and stashed offshore, perhaps as little as 25 cents is ever confiscated. That means that, thanks to the offshore structures available in Moneyland, grand corruption is basically a one-way bet for the clever kleptocrat.

The damage that the looting of the world is doing to the structure of civilisation is obvious. The Nigerian and Ukrainian states are so enfeebled by corruption they have lost control of whole provinces. The Kremlin elite has mastered offshore skulduggery in its aggressive efforts to steal fortunes, and to prevent the rest of the world uniting against it. Insiders in the Venezuelan regime have made billions from the black market in their own currency, stashing the proceeding in Miami real estate, while ordinary people are struggling to buy food or medicine.

If you are a believer in the values that Western civilisation claims to be based on, then there is no upside to the secrecy available offshore for those willing to pay for it. So why do I think it should be available for free?

The problem is that there are and will always be people with a legitimate need for anonymity. Back in 2016, the Panama Papers leak revealed that Emma Watson – the actress who played Hermione Granger in the Harry Potter films – had used a BVI company to own London property. Her reasons for doing so were entirely understandable: she has been plagued by stalkers and didn’t want her name and address available on the Land Registry. There are thousands of others out there like her, who would be placed at risk if their names were revealed.

Under my proposal, these people would be able to essentially go ex-directory, to make sure their address was a secret between them and the Land Registry, and only available beyond that to people with a good reason for knowing it. Right now, only those who can afford it can access anonymity, but it should also be available to anyone at risk.

Once we have established a system where those with a legitimate right to anonymity can secure it, we can strip away everything else. Under the current system, kleptocrats can keep their property ownership secret not just from the public but also from the authorities; this must end. As soon as crooks and thieves are no longer able to conceal their ownership offshore, they’ll be reduced to the status of thieves trying to flog iphones in Hackney, the link between their crime and their expenditure will be obvious and overt, making their prosecution far more straightforward.

If Britain truly wishes to drive dirty money out of its economy, it needs a whole new approach to ownership information, where transparency is the default option. This simple reform would prevent the looting of some of the most vulnerable places in the world, and do more long-term good than our aid budget.

Moneyland: Why Thieves & Crooks Now Rule The World & How to Take It Back, by Oliver Bullough, is published by Profile Books

Oliver Bullough is a journalist and author from Wales. He has lived and worked throughout the former Soviet Union. His latest book is Butler to the World.


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