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Dear reader,
Kensington’s stuccoed mansions rank among Britain’s priciest properties. But gleaming facades can mask questionable ownership and wealth. The Ukraine invasion has sparked renewed calls to increase the transparency of Russian money that has flowed into the London property market. The loophole-laden transparency legislation rushed through parliament this week is a belated start.
About 6,000 properties in the borough are registered to anonymously owned companies, according to Joe Powell, co-founder of campaign group Kensington Against Dirty Money. A quarter of them are based in Jersey and the British Virgin Islands.
Transparency International has identified £284mn of property in the borough owned by Russians accused of corruption or links to the Kremlin.
However, the complexity of ownership structures — involving tax havens, nominees and trusts — means the total number ultimately controlled by Russian oligarchs is anyone’s guess.
In the most expensive street of all — Kensington Palace Gardens — stands the mansion belonging to Chelsea football club owner Roman Abramovich. Labour MP Chris Bryant told parliament last week that the Russian billionaire was looking to sell the property because he was “terrified” of being placed under sanctions. Fellow opposition MP Margaret Hodge followed up this week by suggesting on the radio that the property could be seized and used to house those refugees in temporary accommodation.
Abramovich is not at present the target of sanctions. But Labour party leader Sir Keir Starmer has described him as a “person of interest” to the UK government because of his links to the Russian state. Starmer was speaking under parliamentary privilege, which protects against legal proceedings.
Asked why Abramovich had not had sanctions imposed on him, UK prime minister Boris Johnson told foreign correspondents the government had to move carefully. “None of us want to live in a country where the state can take your house off you without a very high burden of proof and due process . . . There’s no point saying, yeah, we’re going to go after him, and then you come up against the brick wall of lawyers.”
That sense of caution may have been reinforced by a huge £1.5mn legal bill incurred by the National Crime Agency in 2020. It followed a failed attempt on April 8 2020 to secure unexplained wealth orders — court orders that compel the target to reveal the sources of their wealth — in relation to three London properties worth £80mn linked to a wealthy Kazakh family.
The economic crime bill rushed through the Commons on Monday will help the government’s general crackdown. It will protect law enforcement agencies against huge bills for costs, so long as they demonstrably behaved reasonably and honestly. It will also speed up the imposition of sanctions in cases where the individual has already had sanctions imposed on them by the US or EU.
But it is not at all clear that the bill will achieve its main purpose: removing the opacity around the foreign ownership of property. It will create a new register requiring overseas companies and individuals to declare the beneficial owners — the person who ultimately owns or controls an asset — of all property bought in England in Wales over the past 20 years.
The bill leaves a lot of gaps. Owners will have up to six months to register, potentially allowing people to dispose of or transfer illicit assets. Almost 2,000 properties will be exempt because they were purchased by overseas companies before January 1999, according to Transparency International. It is not obvious how the legislation will be enforced.
The biggest flaw is that, as drafted, individuals will still be able to hide their true identities through nominee agreements with professional services firms. The Chartered Institute of Taxation says that if the goal of the bill is to reveal the real identities of foreigners who own UK property, it will not achieve this.
Quite possibly, full transparency is not the government’s goal. It might give weight to the privacy and security fears cited by wealthy individuals as reasons for keeping details of property ownership out of the public domain. But designing a watertight register that allows owners to maintain their privacy will be difficult.
Yet the government has no excuse for its foot-dragging. London’s dirty money problem is the product of decades of complicit neglect, according to Tom Keatinge, director of the Centre for Financial Crime and Security Studies at defence think-tank the Royal United Services Institute.
It is almost six years since David Cameron, the then prime minister, first promised to stop the UK being a “safe haven for corrupt money” by creating a register of the real owners of British property. The lack of urgency was evident as recently as mid-January when the government rejected the idea of bringing an economic crime bill forward in the next parliamentary session.
It is shaming that it took the invasion of Ukraine to make Westminster tackle the issue. But better late than never. If the government fails to dispel property ownership secrecy in the current bill, it must try again until it gets it right.
Best wishes for the rest of the week,
Vanessa Houlder
Lex writer
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