Westminster city council on Wednesday pledged to clamp down on the “dirty money” that has been linked to the proliferation of US-style candy stores in the centre of London, and to push for greater transparency over assets held offshore.
The London authority said it wants to combat the capital’s reputation as Europe’s centre for money laundering given the extent of opaque ownership structures used to buy and hold properties in the West End.
Adam Hug, leader of Westminster council, said the web of properties whose occupiers were increasingly hard to track had been “Westminster’s dirty secret” for many years.
He added that “those in power looked the other way for too long as money of questionable origin flooding into London and investors took advantage of our relatively lax laws”.
The authority this week summoned a roundtable of property owners, officials and anti-corruption experts to help with the campaign to crack down on the flow of illicit finance in the district.
It called on the government to tighten rules on the use of tax havens and provide greater resources for tackling money laundering in the UK.
In March, the government introduced measures to seize the properties of wealthy oligarchs in response to Russia’s invasion of Ukraine, addressing the practice of using London property as an easy, discreet way of parking money.
“It took the war in Ukraine to refocus attention on oligarch investments and what London has become in terms of a European laundromat for dirty money,” said Hug.
“But the problem goes wider than Putin and his henchman to many others who see Belgravia, Knightsbridge, Mayfair and other parts of Westminster as places to rinse their money.”
He added that this “not only damages the reputation of our city by supporting authoritarianism abroad but drains the vitality of areas with empty or underused homes”.
Westminster council has already launched a probe into possible business rates evasion by as many as 30 sweet and souvenir shops operating on Oxford Street, which it estimates has cost about £8mn.
A common feature of these enterprises has been the use of opaque shell company structures that make it hard to identify the genuine owners, it said.
Offshore trusts have long been used by Russian oligarchs to acquire homes and commercial properties, although many assets have been frozen by the government since sanctions were imposed.
Westminster said there had been a 300 per cent rise in the number of properties registered to owners in Jersey since 2010, and a rise of 1,200 per cent in the number registered to owners in Russia.
The council said that this rise in investment “underlines fears that property is being used to launder money of questionable origin”.
The Labour-controlled council plans to sign the fair-tax pledge aimed at ensuring transparency in the tax system. Westminster also wants the government to make changes “to stop London being a soft touch for investors with dubious money to spend”.
The authority wants the government to tighten UK procurement laws to restrict the artificial use of tax havens and low-tax jurisdictions.
It also called for commitments over resourcing for the National Crime Agency and HM Revenue & Customs to fight money laundering, as well as tougher penalties for laundering, to be included in the forthcoming economic crime bill.
It said the beneficial ownership register of property also needed to be properly implemented. The council wants to increase the fee to register a company at Companies House from £12 to £50 and more rigorous identity checks to be carried out.
Source: Financial Times