ANTI CORRUTION

Nigeria’s kleptocrats have a toxic love affair with London’s expensive real estate

Pin it

The pre­vail­ing nar­ra­tives about cor­rup­tion in Nigeria rarely men­tion its inter­na­tion­al dimen­sion. They tend to gloss over how the United Kingdom, United States, and oth­er finan­cial cen­ters wel­come the steady stream of illic­it cash flow­ing out Africa’s largest econ­o­my.

Yet the country’s klep­to­crats are increas­ing­ly exploit­ing weak­ness­es in the inter­na­tion­al finan­cial sys­tem to laun­der and con­ceal their ill-got­ten gains, often via high-end real estate in London, New York, and Dubai.This month’s release of the Paradise Papersa juicy sequel to last year’s Panama Papers leak—is a glar­ing reminder of how off­shore tax havens and secre­cy juris­dic­tions facil­i­tate cor­rup­tion in devel­op­ing coun­tries like Nigeria. According to Global Witness, the top five juris­dic­tions impli­cat­ed in the Papers, are all UK Overseas Territories or Crown Dependencies like the British Virgin Islands, Jersey, and the Isle of Man.

Nigeria has lost an esti­mat­ed $230 bil­lion or more in ille­gal finan­cial out­flows since 2004: equal to $1,280 for every Nigerian cit­i­zen. Expatriating stolen funds to off­shore tax havens and secre­cy juris­dic­tions not only sucks val­ue out Nigeria’s econ­o­my, it makes stolen funds hard­er to find and puts pres­sure on the val­ue of the naira—Nigeria’s flag­ging cur­ren­cy.

That’s no moon…”

Recently dubbed “The Death Star of Global Kleptocracy”, London is not just the world’s bank­ing cap­i­tal, it is also a glob­al focal point for cor­rupt­ly-acquired wealth. Corrupt offi­cials from around the world find the UK attrac­tive because of its lax cor­po­rate and prop­er­ty laws, ane­mic anti-mon­ey laun­der­ing safe­guards, and the vari­ety of posh neigh­bor­hoods.

 Nigeria has lost an esti­mat­ed $230 bil­lion or more in ille­gal finan­cial out­flows since 2004: equal to $1,280 for every cit­i­zen.  At least £4.2 bil­lion ($5.6 bil­lion) worth of UK prop­er­ties have been bought with sus­pi­cious wealth from around the world—likely just a tiny frac­tion of the total, esti­mates Transparency International. Decades of such prop­er­ty acqui­si­tions by absen­tee for­eign own­ers have had a pro­found impact on London, cre­at­ing “ghost neigh­bor­hoods” where many high-end homes sit emp­ty.

Although it is dif­fi­cult to gauge what per­cent­age of sus­pi­cious prop­er­ties are owned by Nigerian kleptocrats.The exam­ples below have been derived from cor­po­rate, prop­er­ty, and oth­er pub­lic records in the UK and Nigeria. Since these prop­er­ty hold­ings may be of inter­est to inter­na­tion­al law enforce­ment, the names are being with­held.:

  • Three swanky apart­ments col­lec­tive­ly worth over $10 mil­lion linked to Nigeria’s for­mer oil min­is­ter, Diezani Alison-Madueke. Two of the flats were bought by anony­mous brief­case com­pa­nies reg­is­tered in The Seychelles and paid for with loan from a Nigerian bank known to facil­i­tate such deals.
  • Three UK prop­er­ties worth about $7 mil­lion in total asso­ci­at­ed with a senior leg­is­la­tor. One of these res­i­dences is owned by his per­son­al foun­da­tion, anoth­er in his wife, and the most expen­sive is held by an anony­mous shell com­pa­ny.
  • A mul­ti-mil­lion pound jet hangar at a major UK air­port and London flat owned by one of Nigeria’s most noto­ri­ous polit­i­cal god­fa­thers. Implicated in con­tract fraud, elec­tion rig­ging, cor­rupt­ing judges, and brib­ing for­eign offi­cials, this indi­vid­ual has a wide finan­cial foot­print in the UK.
  • A high-end flat in West London held under a fake name used by the son of a for­mer Nigerian head of state. Several UK crim­i­nal mon­ey laun­der­ing and bank fraud cas­es iden­ti­fy this indi­vid­ual and his pseu­do­nym.

The London laundromat

Why do cor­rupt Nigeria elites look­ing to stash their loot find London so attrac­tive?

Home to the world’s snazz­i­est neigh­bor­hoods, London has a mas­sive lux­u­ry prop­er­ty mar­kets through which large sums of mon­ey can be laun­dered in a sin­gle trans­ac­tion. London’s expen­sive hous­ing mar­ket does not dis­cour­age klep­to­crats from invest­ing, finds Transparency International. On the con­trary, it offers oppor­tu­ni­ties to laun­der huge sums of mon­ey at a time.

Buying an opu­lent home in London is a rel­a­tive­ly low-risk invest­ment. These prop­er­ties not only sym­bol­ize wealth and respectabil­i­ty, their val­ue often appre­ci­ates sig­nif­i­cant­ly over time. Such prop­er­ties can also be used to gen­er­ate rental income or laun­der addi­tion­al mon­ey via bogus leas­es.

UK law allows any­one to pur­chase prop­er­ty using anony­mous off­shore com­pa­nies or com­plex mul­ti-lay­ered cor­po­rate struc­tures. According to the country’s for­mer top anti-cor­rup­tion cop, this per­mis­sive sys­tem frus­trates law enforce­ment: “the lack of access to ben­e­fi­cial own­er­ship infor­ma­tion about off­shore companies…is a major bar­ri­er for our inves­ti­ga­tions. Investigators may spend months and years attempt­ing to peel back lay­ers of secre­cy in order to uncov­er how the pro­ceeds of cor­rup­tion are being laun­dered…”

Stemming the tide

What can the UK, United States, and oth­er glob­al finan­cial cen­ters do to wean them­selves off of cor­rupt cash? Because their finan­cial sys­tems are such per­mis­sive oper­at­ing envi­ron­ments, even beefed-up law enforce­ment and finan­cial intel­li­gence efforts almost cer­tain­ly won’t stop klep­to­crats from try­ing to exploit them.

To dis­rupt the flow of cor­rupt cash from Nigeria and beyond, British and American law­mak­ers need to issue direc­tives or enact leg­is­la­tion that elim­i­nates home-grown secre­cy juris­dic­tions like the British Virgin Islands and Delaware. They also should cre­ate pub­lic ben­e­fi­cial own­er­ship reg­istries and expand the range of legal and admin­is­tra­tive tools avail­able to iden­ti­fy and inves­ti­gate sus­pi­cious finan­cial and prop­er­ty trans­ac­tions.

UK law­mak­ers took a step in the right direc­tion last year when they cre­at­ed a potent new legal tool–the Unexplained Wealth Order (UWO). This mech­a­nism empow­ers UK pros­e­cu­tors to force–for example–a Nigerian politi­cian who owns a mul­ti-mil­lion pound London flat to explain how he acquired wealth far in excess of his offi­cial salary. If he refus­es or inad­e­quate­ly responds then the UWO could be used in a sep­a­rate legal process to seize the official’s sus­pect assets under the Proceeds of Crime Act.

First line of defense

Although law enforce­ment efforts have room to expand, Western diplo­mats on the ground in Nigeria could be doing more to help iden­ti­fy klep­to­crats and pre­vent them from estab­lish­ing finan­cial foot­prints abroad. Both UK and US offi­cials have the pow­er to deny trav­el visas to Nigerian klep­to­crats on the basis of cred­i­ble cor­rup­tion alle­ga­tions or unex­plained wealth, but rarely do so.

Under UK Immigration Rules, for exam­ple, the Home Secretary has wide dis­cre­tionary pow­ers to exclude non-cit­i­zens from the UK when it is “con­ducive to the pub­lic good”. Existing immi­gra­tion pol­i­cy guid­ance allows offi­cials to with­hold visas from indi­vid­u­als linked to “pro­ceeds of crime and finances of ques­tion­able ori­gins” and “cor­rup­tion”.

Though by no means a sil­ver bullet—or a sub­sti­tute for fix­ing cor­po­rate and prop­er­ty laws—visa bans should be a foun­da­tion­al ele­ment of any UK or U.S. anti-cor­rup­tion strat­e­gy. Until klep­to­crats from coun­tries like Nigeria are stopped from vis­it­ing their lux­u­ry homes or spend­ing their ill-got­ten gains in cities like London, their “Death Star” rep­u­ta­tion will be hard to shake.

Written by Matthew T. Page

Nigeria’s kleptocrats have a toxic love affair with London’s expensive real estate

xyz_smap:
1
Tagged under:

Log In or Create an account