Evidence submitted by National Trading Standards (ECR0016)

Investment in London prop­er­ty by Politically-Exposed Persons from Central Asia: an extreme case of the UK’s expo­sure to high-end mon­ey laundering

Executive Summary

• High-end prop­er­ty in the United Kingdom is being used as a means to laun­der sig­nif­i­cant sums of mon­ey, with London espe­cial­ly a glob­al hotspot for real estate pur­chas­es using ille­gal­ly or cor­rupt­ly obtained funds. Such prop­er­ties can be used as a secret­ly owned asset that retains val­ue, whilst also pro­vid­ing a bolt hole for cor­rupt indi­vid­u­als should they need to flee their home countries. 
• Central Asia offers an exam­ple of what aca­d­e­mics call an “extreme case” of mon­ey laun­der­ing.  If Central Asian polit­i­cal­ly exposed per­sons (PEPs) are able to laun­der mon­ey in the UK in sig­nif­i­cant num­bers, then it is high­ly like­ly that the UK is “open for busi­ness” for mon­ey laun­der­ing orig­i­nat­ing in all cor­ners of the globe. 
• This paper doc­u­ments sev­er­al exam­ples of unex­plained and/or sus­pi­cious Central Asian wealth enter­ing the UK prop­er­ty mar­ket.  All these cas­es fea­ture the use of ‘shell com­pa­nies” (non-trad­ing com­pa­nies used sole­ly for a spe­cif­ic finan­cial manoeu­vre) to pur­chase these prop­er­ties and hide the unex­plained ori­gins of the wealth behind the sale. 
• The mon­ey used to pur­chase prop­er­ty can often be made up of cor­rupt funds that are co-min­gled with legal­ly obtained and/or qua­si-legal funds, mak­ing the cor­rup­tion pro­ceeds prac­ti­cal­ly indis­tin­guish­able from funds gained from oth­er activities.
• The Tier 1 Investor Visa scheme has allowed for a num­ber of indi­vid­u­als linked with cor­rup­tion and oth­er heinous activ­i­ties to live in the UK.  It is high­ly like­ly that some of the mon­ey used to secure these visas was gar­nered through crim­i­nal activ­i­ty, espe­cial­ly pri­or to a tight­en­ing of the Tier 1 rules in April 2015, mean­ing that dirty mon­ey is will­ing­ly being tak­en by the UK gov­ern­ment in return for residency. 
• Although the UK has made sig­nif­i­cant strides in anti-cor­rup­tion mea­sures in recent years, such as the estab­lish­ment of a ben­e­fi­cial own­er­ship (Persons of Significant Control) reg­is­ter of UK-reg­is­tered com­pa­nies, and leg­is­la­tion that will hope­ful­ly lead to the dis­clo­sure of those who own prop­er­ty through off­shore com­pa­nies, we need to ensure that these mea­sures are accom­pa­nied by effec­tive, rig­or­ous mon­i­tor­ing, and tough mea­sures for those who fail to dis­close such infor­ma­tion, or are shown to have sub­mit­ted false information. 
• Stronger require­ments are also need­ed for due dili­gence on the buy­ers, not just the sell­ers of prop­er­ty, as is cur­rent­ly the case, and penal­ties for those ser­vices providers who abet the cor­rupt in order to pre­vent cor­rupt mon­ey being invest­ed in UK prop­er­ty in the first place. Finally, the legal stand­ing of NGOs should be improved in order for action to be tak­en more eas­i­ly on stolen wealth invest­ed in the UK. 

Introduction and Background

1. We are a group of researchers from the uni­ver­si­ties of Exeter, Cambridge and Columbia, New York who have worked togeth­er on research on mon­ey laun­der­ing and the use of anony­mous com­pa­nies by polit­i­cal fig­ures from Central Asia.  This sub­mis­sion sum­maris­es our find­ings and those of our col­leagues with regard to poten­tial mon­ey laun­der­ing into London property.
2. When klep­to­crats and oth­er crim­i­nals obtain mon­ey illic­it­ly, they are keen to find ways to hide the cor­rupt ori­gins of these funds and to store it some­where that is both safe and will not lead to it los­ing its val­ue. All invest­ments, then, are vul­ner­a­ble to exploita­tion by those seek­ing to laun­der the pro­ceeds of cor­rup­tion and oth­er forms of crime. Bribes, kick­backs, embez­zled funds and so on are, through this laun­der­ing process, giv­en the appear­ance of legit­i­ma­cy, ready to either be stored or used by crim­i­nals for fur­ther illic­it or lic­it pur­pos­es.[1] One of the major ways that this is done is through inter­na­tion­al pur­chas­es of high-val­ue prop­er­ty. Not only does this laun­der a sig­nif­i­cant amount of mon­ey in one tranche, but these prop­er­ties can pro­vide an impor­tant safe­ty net for cor­rupt indi­vid­u­als if the sit­u­a­tion in their home coun­try turns against them. It means they have access to sig­nif­i­cant stored funds that will be dif­fi­cult for offi­cials in their home coun­try to seize, or even iden­ti­fy. Additionally it pro­vides them with a secret “bolt hole” that can­not be eas­i­ly tied to them, where they can con­tin­ue to live in con­sid­er­able lux­u­ry with­out threats to their per­son or wealth.
3. The weak­ness of major world economies to mon­ey laun­der­ing is com­ing under increas­ing inter­na­tion­al atten­tion, as the IMF’s recent­ly revised guide­lines with con­sul­ta­tions with the G7 coun­tries.[2] Unfortunately, the London prop­er­ty mar­ket is a glob­al hotspot for this prac­tice. The com­bi­na­tion of polit­i­cal sta­bil­i­ty, light-touch reg­u­la­tion and, impor­tant­ly, priv­i­leged con­nec­tions with well-estab­lished off­shore tax havens, such as the British Virgin Islands, in the British Overseas Territories and Crown Dependencies, make London extreme­ly attrac­tive for cor­rupt indi­vid­u­als. The sta­bil­i­ty means there is lit­tle chance of their prop­er­ties being lost to vio­lence or polit­i­cal whim, and con­tributes to the fact that prop­er­ty in London gen­er­al­ly retains its val­ue or even pro­duces a sig­nif­i­cant prof­it. The UK’s “light touch” reg­u­la­tion, which remains remark­ably insuf­fi­cient to iden­ti­fy dubi­ous prop­er­ty pur­chas­es even fol­low­ing sig­nif­i­cant reg­u­la­to­ry expan­sion in 2017, and con­nec­tions with off­shore juris­dic­tions means that cor­rupt indi­vid­u­als can through the UK prop­er­ty mar­ket achieve anoth­er of their key require­ments: mak­ing it as dif­fi­cult as pos­si­ble to link the assets to their name and crim­i­nal activ­i­ty. London also offers a num­ber of oth­er ben­e­fits to prospec­tive laun­der­ers of cor­rupt funds. The pur­chase of lux­u­ry prop­er­ty in sought after areas of London gives a cer­tain badge of respectabil­i­ty which can help indi­vid­u­als dis­tance them­selves from their pre­vi­ous cor­rupt prac­tices, laun­der­ing their rep­u­ta­tions as well as their funds. Prestigious pub­lic schools and world class pri­vate health­care also serve to entice cor­rupt offi­cials to make prop­er­ty pur­chas­es in the UK.
4. Politicians from klep­toc­ra­cies will often spend peri­ods out of state employ in pri­vate busi­ness, allow­ing them a cer­tain amount of “plau­si­ble deni­a­bil­i­ty” when it comes to the source of funds. Money earned through legit­i­mate or semi-legal busi­ness will often be mixed with that gained pure­ly from graft, mak­ing the cor­rup­tion pro­ceeds prac­ti­cal­ly indis­tin­guish­able from funds gained from oth­er activ­i­ties. Property pur­chas­es typ­i­cal­ly come at the end of the end of the mon­ey laun­der­ing process, when funds have already been co-min­gled with oth­er sources and passed through an array of shell com­pa­nies set up in secre­cy juris­dic­tions, mak­ing iden­ti­fy­ing the actu­al “ben­e­fi­cial” own­ers of these com­pa­nies extreme­ly difficult.
5. The fact that UK law has so far allowed for prop­er­ty to be pur­chased by com­pa­nies where the own­ers are not pub­licly iden­ti­fied has made it easy for laun­der­ing to occur. A shell com­pa­ny based in an off­shore zone, often owned by anoth­er com­pa­ny in a dif­fer­ent juris­dic­tion and so forth, will increas­es the dif­fi­cul­ty of doing due dili­gence, and make it hard­er for law enforce­ment to track down the actu­al own­er. Real estate agents may also over­look sus­pi­cious activ­i­ty with the temp­ta­tion of gen­er­ous com­mis­sions and oth­er pay offs, mean­ing that the prac­tice of own­ing prop­er­ty anony­mous­ly has flour­ished in the UK.
6. In 2013, the now defunct Financial Services Authority esti­mat­ed that between £23bn and £57bn was being laun­dered in and through the UK annu­al­ly,[3] and in 2016 the National Crime Agency not­ed it could amount to £90bn.[4] The scale of mon­ey laun­der­ing through London prop­er­ty pur­chas­es is, by the very nature of the secre­cy involved, impos­si­ble to iden­ti­fy pre­cise­ly. Still, there are clear indi­ca­tors that it is high­ly preva­lent. At least £4.2 bil­lion worth of London prop­er­ty has been bought by those rep­re­sent­ing a high mon­ey laun­der­ing risk, with the real num­ber like­ly to be much high­er.[5] According to a 2013 Savills report, 90% of new-build lux­u­ry prop­er­ties (£2000psft+) were pur­chased by over­seas buy­ers, with the plu­ral­i­ty of these being from Eastern Europe and the CIS.[6] Given that accord­ing to a 2018 Transparency International report, Central Asia and Eastern Europe have some of the high­est per­ceived lev­els of cor­rup­tion in the world, it is rea­son­able to draw the con­clu­sion that many buy­ers are from areas with con­sid­er­able issues with cor­rup­tion, and that sig­nif­i­cant cor­rupt funds will like­ly be enter­ing the UK prop­er­ty mar­ket as a result.[7]

The Central Asian Cases

•  Central Asia – which we under­stand as the five post-Soviet Central Asian republics of Kazakhstan, Kyrgyz Republic, Tajikistan, Turkmenistan and Uzbekistan – is rou­tine­ly con­sid­ered an iso­lat­ed region of the world.  Indeed, the area lacks impe­r­i­al-era ties to the UK and was iso­lat­ed from most of the rest of the world dur­ing the Soviet peri­od.  Its states only became inde­pen­dent in 1991 and there­fore their his­to­ry of involve­ment in the glob­al finan­cial sys­tem is only a cou­ple of decades old.  However, as researchers on Central Asia, we have found that the trail of pow­er and mon­ey from the region extends to London, via an off­shore root through anony­mous com­pa­nies often reg­is­tered in in UK over­seas ter­ri­to­ries.  To the extent that ser­vice providers (for exam­ple, com­pa­ny for­ma­tion agents, solic­i­tors, accoun­tants) facil­i­tate trans­ac­tions with­out effec­tive checks on Central Asian PEPs, London and oth­er major finan­cial cen­tre­sare, in effect, com­plic­it in the author­i­tar­i­an con­sol­i­da­tion and unequal devel­op­ment of the Central Asian region. From an eco­nom­ic crime per­spec­tive, Central Asia offers an extreme case as it is not a region we would expect to fig­ure wide­ly in the data of prop­er­ty pur­chas­es and res­i­den­cy requests through the Tier 1 visa scheme.  And yet, as the cas­es doc­u­ment below demon­strate, Central Asia in gen­er­al, and Kazakhstan in par­tic­u­lar, is a major source of unex­plained wealth flow­ing into the UK.

• When then-prime min­is­ter David Cameron out­lined his government’s plans to crack down on sus­pi­cious funds being used in the UK prop­er­ty in a speech in Singapore in 2015, he referred specif­i­cal­ly to a prop­er­ty port­fo­lio that fea­tures a build­ing val­ued at over £130 mil­lion, and sit­u­at­ed in the cen­tre of London: 215–237 Baker Street. Since around 2008, it has been ulti­mate­ly owned by a series of secre­tive com­pa­nies reg­is­tered in the British Virgin Islands which serve to hide the iden­ti­ty of the true own­er or own­ers.[8] Anti-cor­rup­tion organ­i­sa­tions have inves­ti­gat­ed this prop­er­ty in an attempt to uncov­er its like­ly own­ers, although the nature of off­shore secre­cy and the dif­fi­cul­ty of pen­e­trat­ing these net­works make unrav­el­ling exact­ly who owns the prop­er­ty a dif­fi­cult task. It is worth not­ing that the prop­er­ty is owned at the ini­tial lev­el by a com­pa­ny reg­is­tered in the UK, which is now required under new leg­is­la­tion to dis­close its ben­e­fi­cial own­ers, dubbed “per­sons of sig­nif­i­cant con­trol” or PSCs. However, the company’s cor­po­rate fil­ings say that there are no PSCs under the cur­rent def­i­n­i­tion, which means that the iden­ti­ty of the property’s own­ers remain hid­den.[9] In 2015, a Global Witness report sug­gest­ed that the building’s own­er had ties to Rakhat Aliyev, the for­mer son-in-law of the pres­i­dentof Kazakhstan, Nursultan Nazarbayev.[10] Lawyers rep­re­sent­ing the nom­i­nee direc­tor of the hold­ing com­pa­ny own­ing the prop­er­ties denied Aliyev was the own­er, but refused to name the actu­al own­er, cit­ing rea­sons of con­fi­den­tial­i­ty.[11] A sub­se­quent inves­ti­ga­tion by news web­site Quartz in 2018, using court doc­u­ments as well as files leaked in the Panama Papers scan­dal, sug­gests that the prop­er­ties were owned at least in part by one or more fam­i­ly mem­bers of the Kazakh pres­i­dent. Quartz reports that Rakhat Aliyev’s for­mer wife, Dariga Nazarbayeva(President Nazarbayev’s eldest daugh­ter) and their son Nurali Aliyev are linked to the prop­er­ties. Both have held key posi­tions in Kazakhstan: Dariga has been the country’s deputy prime min­is­ter and Nurali deputy may­or of Astana, Kazakhstan’s cap­i­tal. According to Forbes Kazakhstan, both have also accrued hun­dreds of mil­lions of dol­lars in pri­vate wealth.[12]

• In April 2010, the Kyrgyz peo­ple forcibly removed President Kurmanbek Bakiyev from pow­er amid alle­ga­tions that he and his son Maxim Bakiyev, who was in charge of a gov­ern­ment devel­op­ment agency, had stolen mon­ey from the state and had com­mis­sioned the mur­ders of polit­i­cal oppo­nents.[13] A Kyrgyz court found Maxim Bakiyev guilty in absen­tia of par­tic­i­pat­ing in cor­rup­tion by embez­zling mil­lions of funds from the Kyrgyz state, ille­gal­ly pri­vatis­ing pub­lic land, and sell­ing off state ener­gy firms for a frac­tion of their val­ue. He claimed asy­lum in the UK in June 2010 and has used a £3.5 mil­lion man­sion in Surrey as his address since his arrival. A Belize reg­is­tered off­shore com­pa­ny, Limium Partners Limited, pur­chased this man­sion in August 2010. A 2015 Global Witness report linked this com­pa­ny to oth­ers involved in an alleged anti-mon­ey laun­der­ing scheme used to fun­nel state funds out of Kyrgyzstan.[14] Despite the con­vic­tions against Bakiyev in the Kyrgyz Republic, he has secured res­i­den­cy in the UK, claim­ing he would be sub­ject to unfair legal pro­ceed­ings and pos­si­ble phys­i­cal harm in his home coun­try.[15].

• Gulnara Karimova is the daugh­ter of the for­mer President of Uzbekistan, Islam Karimov. She held a vari­ety of diplo­mat­ic posi­tions in Uzbekistan until 2013. Authorities in sev­er­al coun­tries are cur­rent­ly inves­ti­gat­ing assets which are linked to Karimova, who is the focus of an $800 mil­lion bribery inves­ti­ga­tion into pay­ments made by “three European telecom­mu­ni­ca­tions com­pa­nies in exchange for access to local mar­kets between 2004 and 2013”.[16] The head of the U.S. Department of Justice’s crim­i­nal divi­sion has said that the case was “the largest for­fei­ture actions we have ever brought to recov­er bribe pro­ceeds from a cor­rupt gov­ern­ment offi­cial.”[17] Karimova’s boyfriend, Rustam Madumarov, bought prop­er­ties in London worth more than £17 mil­lion using shell com­pa­nies and a net­work of off­shore accounts. Two com­pa­nies reg­is­tered in the British Virgin Islands acquired the prop­er­ties. Prosecutors in Uzbekistan have described both Madumarov and Karimova as mem­bers of an “organ­ised crime net­work”. [18]
• Timur Kulibayev, son-in-law of the pres­i­dent of Kazakhstan, pur­chased using a com­pa­ny reg­is­tered in the British Virgin Islands a 12-bed­room man­sion, which had been home to Prince Andrew and Sarah Ferguson, for £15 mil­lion, which was at least £3 mil­lion over the ask­ing price,[19] and £8.6 mil­lion more than Kulibayev was advised by a sur­vey­or that the house would be worth at auc­tion.[20] It was bought through “appar­ent­ly con­cealed” links to a series of off­shore com­pa­nies. Buckingham Palace said the sale of the man­sion, Sunninghill Park, “was a straight com­mer­cial trans­ac­tion between the trust which owned the house and the trust which bought it”[21]. In September 2010, a spokesper­son for Kulibayev also denied the use of “cor­rupt” funds and told that the alle­ga­tions against him were “polit­i­cal­ly moti­vat­ed.”[22] However, in 2010 U.S. diplo­mats report­ed from Kazakhstan in cables pub­lished by WikiLeaks, that there is “endem­ic cor­rup­tion among Kazakh offi­cials”, and one unnamed U.S. diplo­mat describes Kulibayev as “the favoured pres­i­den­tial son-in-law” and “the ulti­mate con­troller of 90 per­cent of the econ­o­my of Kazakhstan”.[23] Kulibayev has also pur­chased two large blocks with adjoin­ing mews prop­er­ties in Mayfair for about £45 mil­lion, also using com­pa­nies reg­is­tered in the British Virgin Islands.[24]
• These prop­er­ty pur­chas­es are often accom­pa­nied by res­i­den­cy (and ulti­mate­ly cit­i­zen­ship) requests.  The Tier 1 Investor Visa scheme in the UK gives indi­vid­u­als res­i­den­cy in exchange “for peo­ple with high net worth to make a sub­stan­tial finan­cial invest­ment in the UK”, of £2 mil­lion or more.[25] Our research and analy­sis revealed that Kazakhs were prob­a­bly the largest per capi­ta recip­i­ents on Tier 1 investor visas of any for­eign nation­al group.[26]  Between 2008 and 2013, forty-one Kazakh nation­als were giv­en UK res­i­den­cy, rank­ing Kazakhs as the sixth high­est coun­try recip­i­ents to this per­mit and the high­est per-capi­ta recip­i­ents.[27] These Kazakh nation­als attained these visas dur­ing the peri­od of 2008 to 2015, when checks on appli­cants and their wealth were nei­ther the respon­si­bil­i­ty of the British gov­ern­ment or appli­cants” banks.[28] Transparency International con­clud­ed in a study of the Tier 1 Investor Visas that “it is like­ly that sub­stan­tial amounts of cor­rupt wealth stolen from China and Russia have been laun­dered into the UK through the UK’s Tier 1 Investor visa pro­gramme”. Madiyar Ablyazov, son of Mukhtar Ablyazov, for­mer chair of Kazakh bank BTA, filed his appli­ca­tion for his Tier 1 Visa in 2009 and two months lat­er it was grant­ed. As part of the process, funds of just over £1 mil­lion were put into Madiyar’s name and the Ablyazov fam­i­ly pro­vid­ed the UK bor­der agency with a “mem­o­ran­dum of gift” to ref­er­ence this, signed by Madiyar and Mukhtar Ablyazov. Around the same time how­ev­er, Mukhtar had fled Kazakhstan for London, whilst BTA was being probed by reg­u­la­tors, lead­ing to a sub­se­quent UK High Court judg­ment that Mukhtar Ablyazov had “per­pet­u­at­ed a huge and sys­tem­at­ic fraud against it, pri­mar­i­ly by pur­port­ing to lend or oth­er­wise trans­fer bil­lions of dol­lars to off­shore com­pa­nies with no assets and which appeared to be in the con­trol of [Mukhtar] Ablyazov or his asso­ciates”.[29]
• Conventional think­ing about Central Asia regards the region as iso­lat­ed.  However, as these cas­es show, through inter­na­tion­al pur­chas­es of real estate, the use of shell com­pa­nies for busi­ness trans­ac­tions, out­sourc­ing legal dis­putes to inter­na­tion­al courts, and obtain­ing mul­ti­ple pass­ports, Central Asian elites have become glob­alised “by embed­ding their trans­ac­tions in transna­tion­al net­works”.[30] Despite these increas­ing­ly glob­alised net­works and con­nec­tions to lib­er­al demo­c­ra­t­ic coun­tries oper­at­ed by Central Asian elites, the pol­i­tics of the region has become increas­ing­ly author­i­tar­i­an and repres­sive to cit­i­zens at home and polit­i­cal exiles abroad. The Central Asian regimes par­take in active secu­ri­ty cam­paigns, which tar­get exiled oppo­si­tion lead­ers abroad. Public protests are often vio­lent­ly crushed, such as in 2005 in Andijan, Uzbekistan, and in Zhanaozen, Kazakhstan in 2011. Additionally, this is set against a back­drop of cor­rup­tion evi­denced by Transparency International’s 2018 Corruption Perception Index of pub­lic sec­tor cor­rup­tion, where all five Central Asian coun­tries are ranked in the bot­tom third of those coun­tries per­ceived to be the most cor­rupt, with Turkmenistan ranked 167th and Uzbekistan 157th out of 180 coun­tries. [31]

Implications and Recommendations

These Central Asian cas­es are an extreme illus­tra­tion of a much larg­er prob­lem. In 2016 the National Crime Agency esti­mat­ed that laun­dered mon­ey run­ning through the UK might amount to £90 bil­lion annu­al­ly, with much of it end­ing up in prop­er­ty.[32] Transparency International’s research using open-source data found over £4.4 bil­lion worth of prop­er­ties bought across the UK with sus­pi­cious wealth linked to at least 160 prop­er­ties.[33] Those pur­chas­ing the prop­er­ties are “high-cor­rup­tion risk indi­vid­u­als”, includ­ing those who have been charged and con­vict­ed with cor­rup­tion offences. 84% of these prop­er­ties are iden­ti­fied to be in London totalling a val­ue of £4.2 bil­lion.[34] These fig­ures do not indi­cate the full extent of cor­rup­tion as they are based only on pub­licly avail­able sources. High-pro­file cas­es of mon­ey laun­der­ing by cor­rupt offi­cials or their fam­i­ly mem­bers from out­side Central Asia include the case of SaadiGadaffi, son of Libya’s Colonel Gadaffi, who pur­chased a £10 mil­lion home in Hampstead in London using a British Virgin Island reg­is­tered anony­mous com­pa­ny.[35] After Gadaffi was deposed, Libya’s tran­si­tion­al gov­ern­ment was grant­ed a default judge­ment against this anony­mous com­pa­ny, as the High Court in London in 2012 ruled that the “prop­er­ty right­ful­ly belonged to the Libyan state as it had been pur­chased with divert­ed state funds”.

Central Asian elites rou­tine­ly use anony­mous shell com­pa­nies to struc­ture pri­vate pay-offs from inter­na­tion­al trans­ac­tions or to hide their acqui­si­tion of for­eign assets such as lux­u­ry real estate. The expo­sure of the ben­e­fi­cial own­ers of all com­pa­nies at a nation­al and inter­na­tion­al lev­el needs to hap­pen so that civ­il soci­ety has access to this infor­ma­tion. A 2016 reform requires ben­e­fi­cial own­ers of UK reg­is­tered com­pa­nies to be placed on record, yet leg­is­la­tion is only as strong as its enforce­ment. The recent pros­e­cu­tion of a whis­tle-blow­er who high­light­ed the lax­i­ty of checks on infor­ma­tion sub­mit­ted to Companies House by reg­is­ter­ing a UK com­pa­ny using the name of a politi­cian[36] sent out the wrong mes­sage: this was the first pros­e­cu­tion of its kind, despite the fact, amongst many oth­er exam­ples, a 2012 Global Witness report had high­light­ed how crim­i­nals from Central Asia and Russia had used the iden­ti­ty of a deceased indi­vid­ual to reg­is­ter a com­pa­ny in the UK: no pros­e­cu­tion, or even inves­ti­ga­tion, appears to have tak­en place.[37]

In addi­tion, there are pit­falls in the due dili­gence con­duct­ed by estate agents, and their respon­si­bil­i­ties should be extend­ed to include due dili­gence checks on the buy­er and not just the sell­er. These checks should include ensur­ing that the pur­chas­ing com­pa­ny has declared its ben­e­fi­cial own­ers and that appro­pri­ate checks have been car­ried out on those individuals.

We rec­om­mend the fol­low­ing pol­i­cy mea­sures for the UK government:

• Give NGOs greater legal stand­ing to take civ­il and crim­i­nal legal action against stolen assets locat­ed in the UK. The recent con­vic­tion of Teodorin Obiang in Paris thanks to a case brought by French NGOs shows what can be done.
• More strict­ly audit inter­me­di­aries, espe­cial­ly banks, to ensure that they are exer­cis­ing their “Know Your Customer” and sus­pi­cious trans­ac­tion report­ing respon­si­bil­i­ties. There must be fines for those who fail on this front in order to cre­ate a fund to sup­port point 1 above. Currently, even when the pro­ceeds of cor­rup­tion are detect­ed in the UK, the banks and oth­er inter­me­di­aries that facil­i­tate their entry almost always escape inves­ti­ga­tion and accountability.
• Better engage the pri­vate sec­tor to par­tic­i­pate in the hunt for stolen assets. Most of the skills nec­es­sary to con­duct com­plex asset recov­ery cas­es are in the pri­vate sec­tor, and giv­en the very lim­it­ed bud­gets for inves­ti­ga­tion for the National Crime Agency, it is nec­es­sary to enlist their help through enabling them to take a share of recov­ered assets.
• Better co-ordi­nate the sys­tem of inter­na­tion­al tax infor­ma­tion exchange and inves­ti­ga­tion with anti-mon­ey laun­der­ing and anti-cor­rup­tion sys­tems. There has been a step-change in the amount of infor­ma­tion exchanged for tax pur­pos­es, but too often this is iso­lat­ed from fight­ing oth­er kinds of finan­cial crime.
• More robust­ly apply visa denial pro­vi­sions against senior offi­cials from sys­tem­at­i­cal­ly cor­rupt gov­ern­ments. This is a cheap and effec­tive mea­sure that is cur­rent­ly under-used.

REFERENCES

1)       Alexander A. Cooley, John Heathershaw, 2017, Dictators Without Borders, Yale University Press: New Haven

2)       Empty Homes, 2018, Empty Homes in London, http://www.emptyhomes.com/assets/final_ehe_2018_web.pdf accessed 19/04/2018

3)       Financial Services Authority, 2013, http://www.fsa.gov.uk/about/what/financial_crime/money_laundering/faqs accessed 19/04/2018

4)       Global Witness, 2015, Blood Red Carpet. https://www.globalwitness.org/en/campaigns/corruption-and-money-laundering/mystery-baker-street/. Accessed 15/04/2018

5)       Global Witness, 2015, Mystery on Baker Street https://www.globalwitness.org/en/campaigns/corruption-and-money-laundering/mystery-baker-street/ accessed 19/04/2018

6)       Guardian, 2010, Prince Andrew and the Kazakh Billionaire. https://www.theguardian.com/uk/2010/nov/29/prince-andrew-kazakh-billionaire.    Accessed 02/05/2018.

7)       Guardian, 2016, Prince Andrew tried to bro­ker crown prop­er­ty deal for Kazakh oli­garch.  https://www.theguardian.com/uk-news/2016/jul/03/prince-andrew-broker-crown-property-kazakh-oligarch. Accessed 02/05/2018.

8)       Guardian. 2017. The “Golden Visa” Deal: “We Have in Effect Been Selling off British Citizenship to the Rich”. Available: https://www.theguardian.com/uk-news/2017/jul/04/golden-visa-immigration-deal-british-citizenship-home-office. Accessed 19/04/2018

9)       Home Office. 2018. Tier 1 (Investor). https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/675203/tier-1-investor-v12.0ext.pdf. Accessed 18.04.2018.

10)   Migration Advisory Committee. (2014). Tier 1 (Investor) Route: Investment Thresholds and Economic Benefit.https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/285220/Tier1investmentRoute.pdf. Accessed 19/04/2018

11)   National Crime Agency. 2016. National Strategic Assessment of Serious and Organised Crime 2016. http://www.nationalcrimeagency.gov.uk/publications/731-national-strategic-assessment-of-serious-and-organised-crime-2016/file. 19/04/2018

12)   Savills, 2013, Spotlight: The World in London http://pdf.euro.savills.co.uk/residential—other/spot-worldlondon-lr.pdf accessed 19/04/2018

13)   Telegraph, 2010, WikiLeaks: Kazakh bil­lion­aire who bought Duke of York‘s home has “avarice for large bribes”. https://www.telegraph.co.uk/news/worldnews/wikileaks/8170767/WikiLeaks-Kazakh-billionaire-who-bought-Duke-of-Yorks-home-has-avarice-for-large-bribes.html. Accessed 02/05/ 2018.

14)   Telegraph, 2017, Fears that “dirty mon­ey” paid for Uzbek dic­ta­tor‘s daugh­ter‘s £17m Mayfair and Belgravia homes.  https://www.telegraph.co.uk/news/2017/12/02/fears-dirty-money-paid-uzbek-singers-london-homes/. Accessed 02/05/2018

15)   Transparency International, 2015, Corruption on Your Doorstep, http://www.transparency.org.uk/publications/corruption-on-your-doorstep/#.WrEhjWrFKUk accessed 19/04/2018

16)   Transparency International, 2018, Corruption Perceptions Index 2017, https://www.transparency.org/news/feature/corruption_perceptions_index_2017accessed 19/04/2018

17)   Transparency International. 2017. Faulty Towers: Understanding the Impact of Overseas Corruption on the London Property Market. http://www.transparency.org.uk/publications/faulty-towers-understanding-the-impact-of-overseas-corruption-on-the-london-property-market/#.Wtdh1SMrK8o. Accessed 18.04.2018

18)   Transparency International, 2017, Overseas Corruption Pricing Londoners Out of the Capital http://www.transparency.org.uk/press-releases/faulty-towers/#.WuBl6Zch3IU accessed 19/04/2018

May 2018

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[1] Transparency International, 2015, Corruption on Your Doorstep, http://www.transparency.org.uk/publications/corruption-on-your-doorstep/#.WrEhjWrFKUk accessed 19/04/2018

[2] IMF, Review of 1997 Guidance Note on Governance — A Proposed Framework for Enhanced Fund Engagement, 22 April 2018, http://www.imf.org/en/Publications/Policy-Papers/Issues/2018/04/20/pp030918-review-of-1997-guidance-note-on-governance

[3] Financial Services Authority, 2013, http://www.fsa.gov.uk/about/what/financial_crime/money_laundering/faqs. Accessed 19/04/2018

[4] National Crime Agency. 2016. National Strategic Assessment of Serious and Organised Crime 2016. http://www.nationalcrimeagency.gov.uk/publications/731-national-strategic-assessment-of-serious-and-organised-crime-2016/file. Accessed 19/04/2018.

[5] Transparency International, 2017, Overseas Corruption Pricing Londoners Out of the Capital http://www.transparency.org.uk/press-releases/faulty-towers/#.WuBl6Zch3IU. Accessed 19/04/2018

[6] Savills, 2013, Spotlight: The World in London http://pdf.euro.savills.co.uk/residential—other/spot-worldlondon-lr.pdf. Accessed 19/04/2018

[7] Transparency International, 2018, Corruption Perceptions Index 2017, https://www.transparency.org/news/feature/corruption_perceptions_index_2017.Accessed 19/04/2018

[8] Quartz, 2018, The Unsolved Mystery of who owns Sherlock Holmes‘s orig­i­nal £130 mil­lion home.  https://qz.com/1245110/the-unsolved-mystery-of-who-owns-sherlock-holmes-130-million-home/. Accessed 02/05/2018.

[9] Quartz, 2018, op.cit.

[10] Global Witness, 2015, Mystery on Baker Street https://www.globalwitness.org/en/campaigns/corruption-and-money-laundering/mystery-baker-street/. Accessed 19/04/2018.

[11] Quartz, 2018, op.cit.

[12] Quartz, 2018, op.cit.

[13] Global Witness, 2015, Blood Red Carpet. https://www.globalwitness.org/en/campaigns/corruption-and-money-laundering/mystery-baker-street/. Accessed 15/04/2018.

[14] Global Witness, 2015, op.cit.

[15] Alexander A. Cooley, John Heathershaw, 2017, Dictators Without Borders, Yale University Press: New Haven, p.45

[16] Telegraph, 2017, Fears that “dirty mon­ey” paid for Uzbek dic­ta­tor‘s daugh­ter‘s £17m Mayfair and Belgravia homes.  https://www.telegraph.co.uk/news/2017/12/02/fears-dirty-money-paid-uzbek-singers-london-homes/. Accessed 02/05/2018.

[17] Guardian, 206, VimpelCom pays $835m to US and Dutch over Uzbekistan tele­coms bribes. http://www.theguardian.com/world/2016/feb/19/vimpelcom-pays-835m-to-us-and-dutch-over-uzbekistan-telecoms-bribes. Accessed 04/05/2018.

[18] Telegraph, 2017, op.cit.

[19] Guardian, 2010, Prince Andrew and the Kazakh Billionaire. https://www.theguardian.com/uk/2010/nov/29/prince-andrew-kazakh-billionaire. Accessed 02/05/2018.

[20] Daily Mail, 2010, £7m — the true “prof­it” made by Andrew on Sunninghill: How Kazakh oli­garch‘s estate agent val­ued Prince‘s for­mer house £4m less than “guide price. http://www.dailymail.co.uk/news/article-1337870/7m-true-profit-Andrew-Sunninghill-How-Kazakh-oligarchs-estate-agent-valued-Princes-house-4m-guide-price.html. Accessed 03/05/2018.

[21] Guardian, 2016, Prince Andrew tried to bro­ker crown prop­er­ty deal for Kazakh oli­garch.  https://www.theguardian.com/uk-news/2016/jul/03/prince-andrew-broker-crown-property-kazakh-oligarch. Accessed 02/05/2018.

[22] Guardian, 2010, Op.cit.

[23] Telegraph, 2010, WikiLeaks: Kazakh bil­lion­aire who bought Duke of York‘s home has “avarice for large bribes”. https://www.telegraph.co.uk/news/worldnews/wikileaks/8170767/WikiLeaks-Kazakh-billionaire-who-bought-Duke-of-Yorks-home-has-avarice-for-large-bribes.html. Accessed 02/05/ 2018.

[24] Telegraph, 2010, Prince Andrew & The Kazakhstan Connection. https://www.telegraph.co.uk/news/uknews/theroyalfamily/7782958/Prince-Andrew-and-the-Kazakhstan-connection.html. Accessed 03/05/2018.

[25] Home Office. 2018. Tier 1 (Investor). https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/675203/tier-1-investor-v12.0ext.pdf. Accessed 18.04.2018.

[26] Cooley & Heathershaw, 2017, p.44

[27] Migration Advisory Committee. (2014). Tier 1 (Investor) Route: Investment Thresholds and Economic Benefit.https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/285220/Tier1investmentRoute.pdf. Accessed 19/04/2018.

[28] Guardian. 2017. The “Golden Visa” Deal: “We Have in Effect Been Selling off British Citizenship to the Rich”. Available: https://www.theguardian.com/uk-news/2017/jul/04/golden-visa-immigration-deal-british-citizenship-home-office. Accessed 19/04/2018

[29] Guardian, Op.cit

[30] Alexander A. Cooley, John Heathershaw, op.cit, p.52.

[31] Transparency International, 2018, op.cit.

[32] National Crime Agency, 2016, op.cit.

[33] Transparency International. 2017. Faulty Towers: Understanding the Impact of Overseas Corruption on the London Property Market. http://www.transparency.org.uk/publications/faulty-towers-understanding-the-impact-of-overseas-corruption-on-the-london-property-market/#.Wtdh1SMrK8o. Accessed 18.04.2018.

[34] Ibid.

[35] Global Witness, 2015, Blood Red Carpet, op.cit.

[36] Mirror, 2018, Outrage as whistle­blow­er is pros­e­cut­ed for warn­ing about Companies House frauds,  https://www.mirror.co.uk/news/politics/outrage-whistleblower-prosecuted-warning-companies-12373225. Accessed 04/05/2018.

[37] Global Witness, 2012. Grave Secrecy, https://www.globalwitness.org/en/campaigns/corruption-and-money-laundering/anonymous-company-owners/grave-secrecy/. Accessed 03/05/2018.

John Heathershaw, University of Exeter

Tom Mayne, inde­pen­dent researcher and consultant

Jason Sharman, University of Cambridge

Alexander Cooley, Columbia University, New York

David Lewis, University of Exeter

With assis­tance from:

Robert Pearce, University of Exeter

Ayesha Kenan, University of Exeter

Evidence sub­mit­ted by National Trading Standards (ECR0016)