Turner Little look at news that experts have suggested that Russian investors are laundering billions of pounds through the UK’s real estate market.
Strong correlation
Earlier this year, global banking institution Deutsch Bank released a new report called Dark matter: the hidden capital flows that drive G10 exchange rates. It suggests that there is strong evidence to indicate that a “good chunk” of the £133 billion of hidden capital flowing into the UK comes from Russia.
Oliver Harvey, a strategist at Deutsche Bank, commented on the report’s findings. He said, “there is a strong correlation between hidden outflows from Russia and the unrecorded capital in the UK” Harvey went on to explain that “given the correlation, I would assume that the share arriving from Russia would be around 50%.”
Deutsch Bank explained in more depth, writing that “in the UK, large positive net errors and omissions likely represent unrecorded financial inflows.” The paper added: “These inflows are linked to the UK’s status as a refuge for international capital flight. For the first time, we confirm through balance of payments data the popular belief that Russian money has flooded into the UK in recent years.”
Penchant for property
Nick Maxwell, the head of advocacy and research at Transparency International UK, a non-governmental organisation which works to reduce corruption, shed more light on this issue. He noted that “property is identified as a key risk for money laundering for corruption, particularly London and high-end property.”
Maxwell went on to comment, “east Europeans and Russians are the largest investors into luxury property in London in the past few years. It is relatively easy to structure property ownership through anonymous offshore companies.” The head of advocacy and research said that over 36,000 London properties are owned by offshore companies, which are mostly immune from government inspection.
He added that “it’s a big problem for anti-money laundering.” Elaborating, Maxwell continued: “Outside of banking, lawyers and accountants are responsible for notifying authorities of any suspicious activities. But the quantity and quality of these reports are low.” The implication is that Russians are using offshore firms to launder money through UK real estate, particularly in the London luxury property market.
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