Police gain new powers to seize the assets of corrupt individuals, but a key weapon in their anti-graft armoury is missing.
The impact of a new law enforcement drive to seize assets linked to corruption might be blunted by delays to the introduction of a long-promised transparency measure that will provide greater clarity over the ownership of valuable London properties used by criminals to shelter the proceeds of crime.
Britain’s so far chequered efforts to thwart the vast sums of illicit wealth reportedly laundered through London by oligarchs and corrupt overseas politicians and officials were given a boost last month when a landmark, graft-fighting measure came into force.
Unexplained Wealth Orders (UWOs), a provision of the Criminal Finance Act, enables police authorities to freeze or recover assets in excess of £50,000 if there is reason to suspect they are the proceeds of corruption and their owner is unable to explain how they were financed.
The measure is a significant advance because to date law enforcement agencies have been restricted in what they can do about the suspicious wealth of non-UK nationals unless they have been convicted of an offence in their country of origin. Enquiries are even more challenging if the individual concerned is a member of a corrupt government.
But while the UWOs are seen by transparency activists and many politicians as a significant step forward, some criminals may evade detection by delays in the introduction of a public register of the beneficial – or ultimate – owners of overseas registered companies that buy or own London property, the world’s first such transparency measure.
Criminals are able to launder their funds through London’s real estate market by purchasing property anonymously through shell companies set up in offshore tax havens that do not require the public disclosure of ownership. Over 75 per cent of UK properties currently under investigation use offshore corporate secrecy – a tactic regularly seen by investigators pursuing high-level money laundering, according to a government statement issued last month. Many of the companies owning London properties are believed to be registered in British Overseas Territories and Crown Dependencies.
In late 2015, then prime minster David Cameron pledged to launch the beneficial ownership register as part of the UK’s bid to crack down on corruption. “London is not a place to stash your dodgy cash,” Cameron declared. But a change of government, Brexit negotiations and apparent concerns about how property ownership transparency might impact inward investment in the UK appear to have put the register on the backburner, despite its having cross-party support. There was even concern last year that delays over tabling legislation for the measure, originally set for April this year, might be “terminal”.
Recent research by the campaign groups Global Witness, Transparency International and Who Owns England? has revealed that 86,000 properties across the country are owned by companies incorporated in offshore jurisdictions, about the same figure as in late 2015 when the then government pledged to force a higher degree of transparency. Of the London properties in the latest data, over 10,000 and located in Westminster and some 6,000 in Kensington and Chelsea.
After activists and parliamentary advocates exerted renewed pressure on the government, in January Prime Minister Theresa May drew up a new legislative timetable for the UK property register. Yet to the disappointment of its supporters, the schedule will not see it coming into force until 2021. A further setback was the narrow defeat in the Lord’s last month of an amendment to the Sanctions and Anti-Money Laundering Bill which would force British Overseas Territories and Crown Dependencies to publish public registries of beneficial ownership. However, supporters of the amendment are hopeful that it will be reconsidered when the bill is debated in the Commons.
The focus of current concerns, though, is the UK property register – leading UK anti-corruption NGOs have told Alaco that its delayed introduction has implications for the UWOs.
Rachel Davies Teka, head of advocacy at Transparency International, said the full potential of the latter may be limited. Global Witness senior campaigner Naomi Hirst took a similar view, “Certainly without the property register unexplained wealth orders may not be as used as much as they could be.”
Davies Teka explained why UWO and the property register need to work hand-in-hand for maximum effect, “This register will have an impact on unexplained wealth orders because in order for police in some cases to understand who might be linked to certain properties transparency is important.
“Of course there are other ways of finding that information as well….court documents, data from leaks and by looking at available land registry information.
“But it would be much easier to identify where there is suspicion if we had this property register in place… A lot will still go under the radar without the register. To use an unexplained wealth order you need to have a level of suspicion to start with. You can’t just hand them out willy-nilly…Having that suspicion would be greatly aided by having the register in place.”
While there is relief that the government has timetabled the introduction of the transparency measure, the long notice period, activists believe, will do little to deter money launderers and could even give them an opportunity to sell-off their assets or make it harder for law enforcement to identify them.
“It gives ample time for people to make sure their assets take flight before action can be taken. I think that’s part of it but it also gives an extra three years for people to use the property market to launder their wealth,” said Davies Teka . “I don’t think people will be deterred yet from investing corrupt wealth here because three years, in terms of how quickly you can (conduct) transactions, is still a long (time).”
Hirst of Global Witness concurs, “Another three years of secrecy is another three years in which the corrupt get to carry on enjoying their ill-gotten wealth and.. probably (make) more effort to hide their wealth if they suspect that they have got this extra period of time to do that.
“I think really the point is that if we are actually serious about making the UK a hostile environment for the corrupt we cannot do this in a piecemeal way.”
Yigal Chazan is an associate at Alaco, a London-based business intelligence consultancy.