The UK has a money laundering problem

July 17, 2015 by Mark Dunn

It has been claimed that the City of London has become the centre of the world's drug trade money laundering operations.  Robert Saviano, the author of Gomorrah, an international bestseller focusing on organised crime in Italy, says UK authorities do not treat the activity with any degree of priority because it is mostly money laundered by foreign individuals and organisations.  Camorra said: "The British treat it as not their problem because there aren't corpses on the street."

Threat to the reputation and the UK economy

Last month, the National Crime Agency (NCA) warned that hundreds of billions of dollars were being laundered through UK banks and their subsidiaries every year.  The NCA said that the extent of money laundering taking place in London represented a threat to both the reputation, and the economy, of the UK.  The reputational threat, the NCA said, was as a result of the leading role that Britain plays in developing and implementing international standards to prevent money laundering.  Furthermore, the agency said that organised crime gangs are now being joined by terrorist groups in laundering money through London.

Last week a Channel 4 Dispatches investigation revealed evidence that the boom in the capital's property market is being fuelled by foreign buyers, who are using it to launder money gained through criminal activity.

Two reporters posed as corrupt Russian politicians.  They used five different estate agents to view five very expensive properties in central London, with price tags ranging from £3 million to £15 million.  The estate agents were made aware that the money to be used for the purchases would be from criminal activity and yet they agree to continue with the sales even, in some cases, recommending law firms to the clients to help them hide their identities.

Importance of due diligence checks to combat money laundering

Earlier this year, Transparency International called for a law on transparency of ownership on foreign companies registered as owners of high-value UK property.  For this to happen, before a property purchase by an overseas company is finalised, the company should be required to submit to Land Registry the same details that UK registered companies must submit to Companies House.

British legislation only requires the buyers of property in the UK to undergo due diligence checks by an estate agent, because it assumes that the purchaser will already have been checked out by his or her solicitor, and estate agencies are at risk of unknowingly perpetuating the laundering of money, financing terrorism and aiding corruption.

To mitigate this, businesses should ensure they carry out their own due diligence, screening potential buyers against PEPs and Sanctions lists, adverse media, Companies House data and other legal information.  Having a proactive anti-corruption process in place will not only demonstrate compliance to regulators, but also protect businesses from costly fines and unnecessary reputational damage.

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