How laundered money shapes London’s property market

Generali

http://www.ft.com/intl/cms/s/0/f454e3ec-fc02-11e5-b5f5-070dca6d0a0d.html#axzz457r5gVwo

For three-quarters of Londoners under 35, owning a home in the capital remains out of reach. But according to the leaked Panama Papers, buying property in London presented little problem for associates of Bashar al-Assad, the Syrian president; for a convicted embezzler who is also the son of a former Egyptian president; or for a Nigerian senator facing corruption charges. The leaks from the Panamanian law firm Mossack Fonseca have brought back into focus the ownership of London property via offshore companies by people suspected of corruption overseas — a phenomenon that has helped to shape the capital’s housing market, where prices are up 50 per cent since 2007......

.......Most of these properties were bought using anonymous shell companies based in offshore tax havens such as the British Virgin Islands. Overseas companies own 100,000 properties in England and Wales, Land Registry data show. Owning property through a company can present tax advantages but, depending where that company is based, it can also offer anonymity. According to Transparency International figures, almost one in 10 properties in the London borough of Kensington & Chelsea is owned through a “secrecy jurisdiction” such as the British Virgin Islands, Jersey or the Isle of Man. [my bold]

It's been clear to me for a long time that London property has been used to launder money and that money laundering rules are simply ignored by pretty much everyone in the property market except the banks. Whether this has a meaningful impact on prices is another thing entirely of course and just because foreign buyers use UK property to launder money and lots of foreigners own property in K&C doesn't mean lots of people launder money through K&C property.

Still there's food for thought in there and TBH I suspect much of what they're saying could equally be applied to the Sydney housing market.

Estate agents doubled the number of such [money laundering] reports they filed in the year to September 2015, including six reports of suspected terrorist financing — but their reports still totalled only 355 in a year in which more than a million homes changed hands.

cells

why is it a surprise the black market is huge at an estimated $2 trillion globally. The USA supposedly has the largest black market at around $600 billion a year.

Coke Heroin & Tabaco alone is $200 billion a year

With such a huge $2 trillion a year market some of thats going to be saved and the three big asset classes are property shares and cash/equivalents.

I dont think its so much about stopping coke gangs buying London homes as much as it should be about stopping the coke gangs selling coke etc

michaels

Generali wrote: »

http://www.ft.com/intl/cms/s/0/f454e3ec-fc02-11e5-b5f5-070dca6d0a0d.html#axzz457r5gVwo



It's been clear to me for a long time that London property has been used to launder money and that money laundering rules are simply ignored by pretty much everyone in the property market except the banks. Whether this has a meaningful impact on prices is another thing entirely of course and just because foreign buyers use UK property to launder money and lots of foreigners own property in K&C doesn't mean lots of people launder money through K&C property.

Still there's food for thought in there and TBH I suspect much of what they're saying could equally be applied to the Sydney housing market.

All sorts of 'facts' and figures thrown in for example 1m property transactions and only 355 money laundering reports - I would have thought the linkage between these two numbers was pretty tenuous when the main piece is about a much smaller set of buyers, ie foreign shell companies.

It would also appear far from proven that the volume of 'money laundering' transactions is in any way large enough to impact the prices that are not affordable to 75% of Londoners under 35. Are there a lot of Egyptian fraudsters buying in Woodgreen?

Thrugelmir

Estimated that $52 billion left China last year and has been invested in foreign property. Undoubtedly to legitimise the money. Capital controls now limit Chinese citizens to $50k a year.

chucknorris

Thrugelmir wrote: »

Estimated that $52 billion left China last year and has been invested in foreign property. Undoubtedly to legitimise the money. Capital controls now limit Chinese citizens to $50k a year.

We rented a flat last weekend, one of the unsuccessful prospective tenants that we didn't take on was chinese, he provided a bank statement showing over £2m in his current account.

wotsthat

Thrugelmir wrote: »

Estimated that $52 billion left China last year and has been invested in foreign property. Undoubtedly to legitimise the money. Capital controls now limit Chinese citizens to $50k a year.

I don't get the logic. If $52b isn't legit then capital controls then wrong doers are hardly going to be deterred by capital controls.

I don't know how many pence in the pound you pay for converting a secret stash into a London property but I'd imagine capital controls just increase the price of the laundry.

Generali

wotsthat wrote: »

I don't get the logic. If $52b isn't legit then capital controls then wrong doers are hardly going to be deterred by capital controls.

I don't know how many pence in the pound you pay for converting a secret stash into a London property but I'd imagine capital controls just increase the price of the laundry.

There are some pretty time-worn ways of getting money out of China, generally involving false invoicing from a foreign company or taking a hard currency loan in HK and repaying it in CNY. The Government has been clamping down on both recently, even closing a bank-type institution in HK.

vivatifosi

Generali wrote: »

There are some pretty time-worn ways of getting money out of China,

I need to get out more, as I have to quote R4 (again)...

They had a bit on the news (yesterday?) about a guy who just crosses the border between China and Hong Kong all the time taking people's money across.. Apparently there is a whole industry of people who cross the border to take over the amount over the £35k or thereabouts that the Chinese are allowed to take out.

The article also said that if all of the Chinese who had that amount in a Chinese bank account took it out and offshored it, it would wipe out the country's foreign currency reserves.

Generali

vivatifosi wrote: »

I need to get out more, as I have to quote R4 (again)...

They had a bit on the news (yesterday?) about a guy who just crosses the border between China and Hong Kong all the time taking people's money across.. Apparently there is a whole industry of people who cross the border to take over the amount over the £35k or thereabouts that the Chinese are allowed to take out.

The article also said that if all of the Chinese who had that amount in a Chinese bank account took it out and offshored it, it would wipe out the country's foreign currency reserves.

Generali: reading FT Alphaville since 2008 so you don't have to.

http://ftalphaville.ft.com/2015/08/26/2138542/making-chinas-fx-reserves-feel-inadequate/

http://ftalphaville.ft.com/2016/03/14/2156300/china-and-fx-reserve-adequacy-redux/

NB RRR = Required Reserve Rate, a measure of how much money a bank must hold to make good on deposits customers have made