22 Jul 2020
You can’t move in London for Russian oligarchs these days. The city is a haven for the rich and famous – or those trying to escape scrutiny. Its schools are good, it provides a stable investing environment, and according to those who monitor the flows of illicit money into the UK, the country’s anti-money laundering regime is so toothless that criminals can get away with buying their McMafia mansions here. London’s real estate market is broken, and illicit cash is the reason.
“The UK welcomed Russian money, and few questions – if any – were asked about the provenance of this considerable wealth,” claims the Intelligence and Security Committee of the UK parliament, whose long-awaited report on Russian influence in the UK was released yesterday. That was a mistake, the MPs on the committee say. It normalised Russian influence in the UK, and allowed those who had gained their money nefariously to launder it while gaining power and influence. It echoes former British spy Christopher Steele’s evidence to the committee, which claims Russia has been behind a “gradual and more subtle erosion of our norms and politics”.
“The fact it’s been stated so clearly in a parliamentary report of such significance will, I think, have a very important impact going forward,” says Bill Browder, an anti-corruption campaigner who is the driving force behind the Magnitsky Act, a US law providing for financial sanctions against foreign government officials proven to have done wrong (he’s also a key driver of the UK’s 2018 amendment to money laundering legislation).
“The importance of this report is not to relitigate the past but to create proper defences for the future,” Browder adds. And for many, that means paying attention to where the high-value property market is going, not where it’s been.
Now that Russia has created a well-trodden path, China is marching in – and the UK can’t afford to be as complacent this time.
“The spread of dirty money in the United Kingdom and the hiding of gains we’ve seen from Russia is not the only example of the UK being used to be a safe haven,” says Conservative MP Tom Tugendhat, chair of the Foreign Affairs Committee and China Research Group in parliament.
Until recently, Russians and Indians were the most avid buyers of prime London real estate. But recently they’ve been overtaken by buyers from elsewhere, according to London-based brokerage Beauchamp Estates.
“Since the December 2019 general election, Hong Kong buyers have overtaken purchasers from Russia and India to become the largest group of overseas buyers investing in residential and commercial property in London,” says Jeremy Gee, managing director of Beauchamp Estates. Russian interests have declined since the mid-2010s, thanks to a doubling in cost in the golden investment visa into the UK, and the rise of unexplained wealth orders.
“The Russians we deal with go through stringent anti-money laundering measures and pass, but the concern was some of the money from others that made it to London was proceeds of crime,” he says.
Fifteen per cent of homes bought for more than £1 million by international buyers in prime central London are now bought by those from China or Hong Kong, which China recently subsumed into its control even more strongly than before. Go up to the really high end of London’s property market – those with an asking price of £10m or more – and one in every five are bought by Chinese buyers. In 2019, before they became the biggest buyers, mainland Chinese and Hong Kong buyers invested £7.7 billion in London’s property market. Almost 220,000 London properties are in the hands of Chinese and Hong Kong buyers.
By Chris Stokel-Walker, Wired, 22 July 2020
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