Hidden in Chelsea: Stopping Corrupt Cash in Europe

31 July, 2015

The UK Prime Minister David Cameron announced on Tuesday a crackdown on “dirty money” in the British property market. This comes after years of campaigning by Transparency International UK (TI-UK). We welcome the commitment to increase the scope and access of a public land registry along with the launch of a public register of beneficial ownership information for companies. However, corrupt cash extends beyond borders and action in one country will not end the problem. There needs to be concerted EU-wide action to increase transparency over beneficial ownership both in Europe and in secret jurisdictions.

A Channel 4 documentary ‘From Russia with Cash’ shows a fake, corrupt Russian politician called Boris attempting to buy London property with ill-gotten money while eager British estate agents oblige him. Boris isn’t real, but the problem of money laundering is, and it’s not just in property in the wealthy London borough of Kensington and Chelsea. Money laundering takes many forms and allows the corrupt to legitimise their stolen cash.

Extensive research by TI-UK into beneficial ownership and illicit asset flows shows that at least £122 billion worth of property in England and Wales was held via companies registered in secret jurisdictions in 2014. 75% of the UK properties which are under criminal investigation for grand corruption use offshore corporate secrecy loopholes.

This is an EU wide problem. According to work by Global Financial Integrity, nearly $70 billion flowed illegally into or out of emerging EU economies in 2011. Our colleagues at Transparency International Ukraine claim the ousted regime of Viktor Yanukovych laundered corrupt cash through Europe. Oleksii Khmara, the Executive Director of TI-Ukraine writes in the Guardian: “The Ukrainian elites have for years salted away ill-gotten gains throughout the EU while the authorities, specifically in the UK, Germany, Austria, the Netherlands, Switzerland and Latvia, failed to apply their anti-corruption and anti-money laundering legislation to stop them.”

Global Witness found links between a now deceased corrupt Kazak politician, accused of torture and murder, and a £147 million UK property portfolio. The properties of Rakhat Aliyev, a former Kazak secret police chief, include 221 Baker Street, the fictional abode of Sherlock Holmes. The opacity of modern finance means that loopholes and legal methods allow money laundering to operate using complex techniques. Perhaps a case too far for just Mr Holmes and Dr Watson.

However, by using technology journalists and campaigners can demonstrate how these techniques are utilised by criminals to ‘clean’ their ill-gotten money in property, ‘real businesses’ and luxury goods. The film ‘Our Currency is Information’ by Romanian investigative journalist Paul Radu and Berlin-based activists Tactical Tech show the methods used by Moldovan hitmen, corrupt multinationals in Azerbaijan, and the companies behind the horsemeat scandal to hide their cash.

‘Our currency is information: Exposing the Invisible’, Tactical Technology Collective

In December last year the EU signed its fourth anti-money laundering directive. Under the new legislation full access to company beneficial ownership data will be granted to law enforcement and relevant government bodies in central registers established by EU Member states. But, only partial access will be provided to the public if they can prove a “legitimate interest”.

This does not go far enough. Fully public beneficial ownership registers will create the best environment for businesses, investors and the public. In May we found that four out of five EU citizens believe that shell companies should be forced to show their true owners. Public access to beneficial ownership data across Europe is one necessary step. But the EU needs go further by placing pressure on offshore secret jurisdictions to create their own public registers. Together we can stop the corrupt from using loopholes to launder their cash in Europe.


Related Projects

Enhancing beneficial ownership transparency

The ‘Panama Papers’ of 2016 were a widely discussed phenomenon. But, what did they actually tell us that we didn’t already know? That the global financial system is plagued by shady practices and secrecy? This is a well-known tale.


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