New UK legislation to crack down on money laundering, including property purchases

London

THE UK government wants to make it much more difficult for people, especially foreigners, to shield their wealth in the country, and that is the basis for a new economic crime bill that legislators are trying to pass in parliament as soon as possible.

The tighter rules could go a long way to deterring criminals, including Russian oligarchs, from shielding their money, especially through expensive property purchases.

The Economic Crime (Transparency and Enforcement) Bill aims to introduce reforms on the true identity of property ownership, and strengthen the government's ability to confiscate property and other assets from overseas criminals or oligarchs known to be close to the regime of Russian President Vladimir Putin.

The bill insists there should be transparency regarding overseas companies that own property in the UK, and requires these firms to declare their beneficial owners.

It also requires existing owners in England and Wales to report beneficial ownership information on properties bought before January 1999.

Data from Transparency International UK shows that, since 2016, UK property worth £1.5 billion (S$2.7 billion) was bought by Russians either accused of corruption or with links to the Kremlin. Of this total, £830 million is owned through offshore companies.

But Transparency International also estimates that a further £4.2 billion of "questionable funds from around the world" is currently in London property.

Transparency International estimates that around 94,000 properties in England and Wales are controlled by overseas companies, including around 84,000 that are in offshore jurisdictions such as the British Virgin Islands.

"Transparency over who really owns property is vital to addressing Britain's role as a global hub for 'dirty' money from Russia and elsewhere," said Rachel Davies, head of advocacy at Transparency International UK.

The Office for National Statistics estimates that 73,000 people born in Russia were resident in the UK in 2020.

But Aston Chase, a property agent firm based in central London, claimed in a recent report that this number could be as high as 150,000 today.

According to estimates, these Russian-born residents own around £8 billion worth of real estate, businesses and other investments in the UK.

To be sure, analysts say the economic consequence of the ongoing Ukraine war is likely to have a greater impact on the London residential property market than sanctions against the Oligarchs.

The crisis has brought in its wake a stock market tumble, a surge in energy prices, a cost of living squeeze in a slowing economy, and rising mortgage rates.

These economic factors are likely to end a remarkable property boom since Covid-19 lockdown restrictions began to be relaxed in phases a year ago.

Analysts say it is exceedingly difficult to predict if prices will fall in the next 12 months, given that London's residential market has become highly complex because of geopolitical factors and is difficult to forecast.

Average London prices and rents are steep for first-time buyers in worsening economic conditions, and the fact that there is a shortage of quality properties.

Another factor that could affect the prices of London homes in the coming years is the growing number of Hong Kong emigrants entering the UK via the British National (Overseas) visa scheme.

The UK Home Office has disclosed that, as of the end of September last year, it granted visas to 76,000 applicants from Hong Kong. Many of these people are expected to buy properties in London and other UK cities.