Robert Barrington, Executive Director, Transparency International UK Corruption & the London property market TI Norway, Oslo June 12 2018 Robert Barrington, Executive Director, Transparency International UK www.transparency.org.uk

About TI-UK 45 staff UK focus on Global programmes on Corrupt capital Corruption in politics Business integrity Anything the media throw at us (Aid, football, Russia, Trump, etc) Global programmes on Defence & Security Pharmaceuticals & Healthcare

Corrupt capital The global corruption footprint of the UK Foreign bribe-paying Corrupt capital Acting as a safe have for the proceeds of corruption City of London Overseas Territories Crown Dependencies

What is the size of the problem? £100 billion + laundered via UK each year [source: National Crime Agency] How much is of corrupt origin? How much flows into London/UK property?

What is the impact of the problem?

Key findings [source: Faulty Towers, TI-UK, 2017] The London property market is highly vulnerable to corrupt wealth flowing into it. Analysis of open source material found over £4.2 billion worth of properties bought with suspicious wealth – around 150 properties. House prices are affected as illicit wealth and crisis capital entering the UK increase demand in the London housing market, particularly at the top-end; “the ripple effects they generate resonate across London” New build developments are built targeting wealthy international investors and are not meeting demand for affordable homes. In 14 landmark London developments almost 40 per cent of future homes were bought by those from high corruption risk jurisdictions.

Key findings [source: Faulty Towers, TI-UK, 2017] London’s role as a global safe haven is resulting in an underuse of housing stock. Areas with higher levels of property owned by anonymous companies also have high levels of abnormally low electricity usage; an indicator for empty or underused homes. Young people are moving out of London in record numbers due to the cost of housing. Over half of Londoners responding to our survey said wealthy overseas investors are causing house prices to rise and more than 1 in 5 believed money laundering was a motivating factor for overseas investment.

Case study: Russia Igor Shuvalov, First Deputy Prime Minister Declared assets (including wife) £634,000 Declared annual income £112,000 Allegedly owns London property worth £11.44 million

Some obvious loopholes – Companies House Just twenty people at Companies House police around four million firms’ compliance with company law, without proactive checks made on the accuracy of the information submitted. 4,000 beneficial owners in the Persons of Significant Control (PSC) register are listed under the age of two, and five beneficial owners control more than 6,000 companies – raising the question of whether some of these individuals are nominees. 40 per cent of incorporations last year were done directly through Companies House, which does not undertake background checks on customers. 766 UK corporate vehicles alleged to have been used in 52 large scale corruption and money laundering cases amounting to £80 billion. A quarter of these companies are still active.

What can be done about it - 1 Technical fixes Beneficial ownership transparency Professional enablers Close loopholes – eg Crown Dependencies, AML supervision Proper enforcement

What can be done about it - 2 Fundamental reforms for: Prevent money being stolen Enable it to be tracked Facilitate asset freezing and recovery Punishment of individuals not just removal of assets

Some steps forward Unexplained Wealth Orders UK Beneficial Ownership Transparency Overseas Territories transparency Narrative link to national security UK Anti-Corruption Strategy

Possible roadblocks Brexit Uncooperative jurisdictions Lack of global leadership Crackdown on civil society

causes for optimism Improved political understanding Public anger Transparency revolution open government social media Growing evidence base Cooperation across jurisdictions

www.transparency.org.uk - www.transparency.org Robert Barrington robert.barrington@transparency.org.uk www.transparency.org.uk - www.transparency.org transparency.org.uk