OUR GLOBAL MOVEMENT
October 3, 2021 - A major leak of company information has once again exposed Britain’s continued role as a facilitator of global corruption and must act as a wake up call for the government to strengthen defences against dirty money, Transparency International UK said today.
The ‘Pandora Papers’ lay bare how public officials, organised criminals and businesspeople use companies in the UK’s largest offshore financial centre, the British Virgin Islands (BVI), to hide their identities and activities. These individuals go on to invest their suspicious wealth around the world - including in the British property market.
Investigative work by the Guardian, the BBC and the ICIJ details how the first family of Azerbaijan and their associates used BVI companies to secretly acquire and sell a UK property empire worth nearly £400million over the past 15 years.
Since coming to power in 1993, Azerbaijan’s first family and their allies have taken control of the country’s most valuable industries and natural resources to enrich themselves at the expense of the Azeri people. Previous research from Transparency International UK has identified £5 billion worth of UK property bought with suspicious wealth.
Duncan Hames, Director of Policy at Transparency International UK, said:
“These revelations should act as a wake up call for the Government and regulators to deliver on much-needed and long-overdue measures to strengthen Britain’s defences against dirty money. These leaks show that there is one system for corrupt elites who can buy access to prime property and enjoy luxury lifestyles and another for honest hard-working people.
“Once again Britain’s role as an enabler of global corruption and money laundering have been exposed with the same loopholes exploited to funnel suspect wealth into the country. Not only does this damage the UK’s reputation as a country governed by the rule of law, but it enriches corrupt elites around the world at the expense of their populations. No one benefits from this system but them.
“The UK must redouble its efforts in tackling illicit finance, bringing in long-overdue transparency reforms to reveal who really owns property here as well as resourcing regulators and law enforcement to clamp down on rogue professionals and corrupt cash held in the UK.”
The Pandora Papers highlight several areas where Britain’s defences against dirty money need to be improved. Until these weaknesses are addressed, they will continue to be exploited by criminals and the corrupt to move and hide their illicit wealth in the UK:
The Azeri first family were able to purchase property in this way because UK law allows offshore companies in secrecy jurisdictions to hold property here without requiring these companies to reveal the names of their true owners.
Long-promised legislation to close this loophole and unmask those who hide behind overseas companies (the draft Registration of Overseas Entities Bill) has cross-party support and has been scrutinised by MPs and peers. This legislation could be tabled in Parliament before Christmas.
Buying property in the UK typically requires the help of several professional services, including estate agents, law firms, and banks, who serve as the first line of defence against dirty money by carrying out anti-money laundering checks. These checks are supposed to probe the source of a client’s wealth, with any irregularities or suspicious activity flagged to regulators.
Our research has shown how weak oversight coupled with a lack of a credible deterrent against poor practice means some professional services are able to actively help clients with money to hide, while others remain wilfully blind to the source of their funds without fear of sanctions from regulators.
The UK suffers from too many supervisors not providing effective oversight to their respective professions. This system needs a new approach, with a smaller number of better-resourced supervisors capable of clamping down on rogue professionals.
The UK property market is a magnet for dirty money. Law enforcement has made some progress in targeting illicit funds invested in property using Unexplained Wealth Orders, which allow investigators to freeze assets until the owner explains how they were able to afford them, though no new applications for these orders have been sought for more than two years.
The National Crime Agency should be empowered and resourced to pursue even the most contentious of cases to make those with illicit wealth think twice before bringing it into the UK economy.
