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The numbers game: Putting a figure on corrupt flows into the UK

Written by Ben Cowdock on Monday, 25 July 2016

How much corrupt money is laundered through the UK each year? You’d think there’s an official statistic for this, like inflation or GDP, however you’d be wrong.

Measuring global flows of corrupt wealth, like measuring corruption in general, is incredibly difficult. This is largely due to its secretive nature. Corrupt politicians, officials and oligarchs bringing their stolen wealth into the UK don’t declare their illicit haul to the taxman or the Office for National Statistics.

All we have is estimates deriving from various methodologies which try to capture the total possible amount of flows of corrupt money into the UK.

The Home Office stated in April 2016:

‘The UK remains the largest centre for cross-border banking, accounting for 17% of the total global value of international bank lending and 41% of global foreign exchange trading. The size of the UK’s financial and professional services sector, our open economy, and the attractiveness of the London property market to overseas investors makes the UK unusually exposed to international money laundering risks. Substantial sums from crimes committed overseas are laundered through the UK. There is no definitive measure of the scale of money laundering, but the best available international estimate of amounts laundered globally would be equivalent to some 2.7% of global GDP or US$1.6 trillion in 2009.’

One of the advantages of laundering money through London is precisely that it is a very large market and therefore relatively easy to hide dirty money. Some of the money stays in the UK, perhaps invested in property; some of the money flows through the UK to other destinations. This flow of corrupt wealth is made easier by the UK’s historical links to other attractive financial destinations, such as secrecy havens like Jersey and the British Virgin Islands.

When discussing figures for money laundering through the UK, it’s important to differentiate between ‘illicit wealth’ laundered through the UK and ’proceeds of corruption’ specifically. Illicit wealth can be from any illegal activity, such as drug trafficking or tax evasion. Corrupt money is a subset of illicit wealth that relates to corrupt activity only, often consisting of money gained in bribes or stolen from state budgets by public officials. Because of this overlap between the two terms we often see reports that use them together or interchangeably.

The National Crime Agency (NCA) has given the most up-to-date estimates for illicit wealth being laundered through the UK. In January 2015, it claimed that billions of pounds per day, or hundreds of billions per year, were being laundered through UK banks and their subsidiaries. More recently it admitted the overall figure was unclear, but it was likely that tens or hundreds of billions of pounds were being laundered through London annually.

The NCA has also produced figures for corrupt wealth being laundered through the UK. In the UK’s anti-money laundering national risk assessment, they judged billions of pounds of suspected proceeds of corruption were moved through the UK each year.

In the past, other UK institutions have developed their own estimates. In 2007, the Treasury estimated that each year £10 billion of illicit funds passed through the ‘regulated sector’ of banks, lawyers, accountants, estate agents and high-value dealers. Six years later in 2013 the forerunner to the Financial Conduct Authority, the Financial Services Authority, estimated between £23bn and £57bn of illicit wealth is laundered through London every year. This was based on a methodology developed by the IMF, which estimates between two and five per cent of global GDP is laundered annually. Whilst these numbers are very different they indicate that illicit and corrupt financial flows are seen as a growing problem, with estimates rising significantly over the past 10 years.

As some commentators have noted, it can be dangerous to use figures authoritatively without sufficient verification of their accuracy. Quoting questionable stats can misinform debate, undermine confidence in a cause and lead to ineffective or misguided policy prescriptions. This is something those of us fighting corruption can ill-afford.

Despite this, well-caveated estimates do have their place. They can highlight the potential scale of an issue without becoming obsessed with finding a definitive figure. For example, almost all of the estimates on the scale of corrupt wealth going into or through the UK go into billions of pounds. This is enough money to have a real impact on the people it is stolen from. Although these figures may sound implausibly large, it’s worth remembering that the cost of buying just ten large houses in London could be at least £100 million, and there are now almost 40,000 properties registered in London whose owners have hidden their identities behind shell companies in offshore secrecy havens – the favoured corporate vehicle of the corrupt.

So what is TI’s view on the amount of corrupt money going into or through the UK? We have looked at a range of figures produced by a variety of methodologies. We do not state a precise figure ourselves, though due to their operational experience, we often quote the NCA figure from 2015 that at least a hundred billion pounds of illicit wealth is likely to be laundered through the UK each year. Based on this and other available estimates, we think it’s likely the amount of corrupt wealth being laundered through the UK annually is certainly hundreds of millions of pounds, probably billions, and possibly tens of billions. Whatever the exact figure, even at the bottom end of the range this remains a serious issue, not only for the countries where the money is stolen from but for the international reputation of the UK as well.

Photo: Flickr / Altug Karakoc.

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Read 720 times Last modified on Monday, 25 July 2016 15:51
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Ben Cowdock

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