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The case for ending offshore corporate secrecy in the UK property market

Written by Nick Maxwell on Tuesday, 3 March 2015

Secrecy, or more specifically the use of secret companies incorporated in offshore jurisdictions, undermines money laundering investigations and leaves the door open for corrupt wealth – stolen from around the world – to be invested in high-end UK property.


Secrecy, or more specifically the use of secret companies incorporated in offshore jurisdictions, undermines money laundering investigations and leaves the door open for corrupt wealth – stolen from around the world – to be invested in high-end UK property. 

Luxurious properties in the UK provide a much-sought after badge of wealth and respectability, and represent a very safe bet for the corrupt from around the world. The high prices of the London housing market do not discourage money launderers; on the contrary, they represent an opportunity. The higher the prices, the more money can be laundered through it.

Our research Corruption on your doorstep – How corrupt capital is used to buy property in the UK’  provides a detailed review of money laundering risks associated to the proceeds of corruption in the UK property market.

We find that UK property is attractive to those seeking to launder the proceeds of grand corruption from around the world. Indeed over £180m worth of properties in UK have been brought under criminal investigation as the suspected proceeds of international corruption since 2004.

Law enforcement recognise that this is likely only to be the tip of the iceberg of the true scale of proceeds of corruption invested in UK property.

The UN Office on Drugs and Crime estimated in 2012 that typical law enforcement detection levels for money laundering stand at around 1%. More recently in the UK the Public Accounts Committee found that the UK was only confiscating 26 pence out of every £100 of identified criminal gains.

So why is it so difficult to identify money laundering and prevent it?

Well the answer is that the private sector should be the first line of defence in detecting money laundering. Money laundering regulations require professionals across a range of sectors in the private sector to identify suspicious activity by establishing the true owner – the beneficial owner – of assets. Those professionals – in estate agencies law and finance – should investigate whether there are any grounds for concern about illegitimate sources of wealth.

In property, the problem of the private sector failing to report suspicions is particularly acute. According to the latest figures which cover October 2013 to September 2014, estate agents contributed to only 0.05% of all Suspicious Activity Reports (SARs) submitted. This figure does not match the risks posed by money launderers to the UK property market

Money launderers can easily create offshore companies to hold wealth and assets and provide secrecy for the beneficial owners.

Our research showed the scale of use of offshore secrecy in property under criminal investigation for grand corruption and the broader footprint of offshore secrecy in the UK property market.

Over 75% of the UK properties under criminal investigation for grand corruption use offshore corporate secrecy. For all criminal investigations analysed, every property that made use of a foreign company to hold property used a company from an offshore secrecy jurisdiction, rather than a major economy.

As of July 2014, across the England and Wales, at least £122bn worth of property was held by companies registered in secrecy jurisdictions. Out of 91248 foreign company-owned properties in England and Wales, nearly two thirds are held via the British Virgin Islands and Channel Island structures.

London by far dominates the footprint of offshore company holding of properties in the Land Registry data.

In total 36342 London properties totalling 2.25 sq miles are held by offshore companies. Of these, 38% in the British Virgin Islands, 16% in Jersey, 9.5% in Isle of Man, and 9% in Guernsey. Almost one in ten properties in the City of Westminster (9.3 per cent), 7.3 per cent of properties in Kensington & Chelsea and 4.5 per cent in the City of London are owned by a company registered in an offshore secrecy jurisdiction. 

It’s is clear from the data that offshore ownership of property is relatively common particularly in London. This offshore ownership effectively prevents money laundering checks by the private sector.

What’s more, our data shows that companies incorporated in British Overseas Territories and Crown Dependencies rather than US secrecy jurisdictions like Delaware, are the preferred method of concealment for those under UK criminal investigation for grand corruption.

These vulnerabilities are damaging for the UK given the huge scale of the investments coming into UK and London property. The UK attracts the greatest foreign investment volumes among all European real estate markets, securing an estimated £24bn just in the first half of 2014. According to a 2013 Savills report, 90% of new-build luxury properties were purchased by overseas buyers, with investors from Eastern Europe and Russia, the Middle East and North Africa, and China taking the lions share.

However, we believe that the UK doesn’t have to wait for legislation to require greater company transparency in the offshore territories. TI-UK believes that any foreign company intending to hold a property title in the UK should be held to the same standards of transparency required of UK-registered companies. The UK has taken very positive steps forward to legislate to establish a public register of beneficial ownership of companies. It is important to level the playing field and close the loophole of offshore companies that invest in UK assets, including property.

It is time to unmask secret offshore companies that own so much property in the UK.


To access the campaign microsite click here

To read and download the report click here

To call on UK political party leaders establish transparency over who owns the companies that own so much property in the UK click here

To follow the news on Twitter use the hashtags #DoorStepCorruption and #OffShoreLondon



Read 8456 times Last modified on Tuesday, 24 November 2015 11:48

Nick Maxwell

Nick is TI-UK's Head of Strategic Engagement. You can view his full bio here, and tweet him @NickJMaxwell.

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