The Pandora Papers - the biggest ever leak of offshore data - has revealed that the UK’s property market is being abused to the tune of billions by the world’s rich and powerful.
The documents have exposed the secret dealings of some of the most influential and wealthy people in the world, including the growing practice of buying UK properties through secret, offshore shell companies.
The Pandora Papers alone suggest that more than £4bn worth of property has been bought in this way, with the overall figure thought to be closer to £170bn.
The UK property industry has long been a target of fraudsters and money launderers due to the low levels of transparency and the fact that properties can be purchased by companies.
And, while owning a UK property through an offshore firm is not illegal, it does enable the ultimate beneficial owner to remain anonymous, which both heightens the risk of money laundering and enables the owner to avoid paying UK tax.
The Pandora Papers is not the first time the potential risks of allowing offshore ownership of UK property has been highlighted. In 2016, the Panama Papers were leaked. Similar to the Pandora Papers, the Panama Papers exposed the multitude of ways that the rich and powerful were using shell companies and other corporate vehicles to mask the ownership of legal entities.
John Dobson, chief executive officer at anti-money laundering specialists SmartSearch, said: “The Panama Papers really brought the lack of transparency surrounding shell companies to the fore, particularly in relation to the UK property market. In response, the UK Government published draft legislation* about setting up a ‘register of overseas entities’, to include ‘information about their beneficial owners’.
“And while the initial response was hugely positive, that draft legislation has remained just that - a draft - which is why perhaps, it is no surprise that five years on from the Panama Papers, the Pandora Papers have confirmed that the risk of money-laundering through the purchase of UK property is still very high.”
Dobson says that, while the UK may not have actually passed the legislation drafted to combat the problem of UBOs, there are things estate agents can do to identify exactly who they are working with.
“For those working in the property purchase chain, offshore buyers should always raise a red flag., because, while it is not illegal in itself to own a property through an offshore firm, you must be able to identify who the UBO is. If someone is trying hard to hide their true identity, at best, they are trying to do something immoral, at worse, they are trying to do something illegal.”
Dobson continued: “However, these people employ the very best to hide what they are up to, so it can be very difficult to actually establish the identity of the UBO. Estate agents will often find themselves lost in a maze of corporate structures making it almost impossible to work out who is really behind it all.”
SmartSearch’s innovative electronic verification platform runs full AML checks on corporates, identifying the true beneficiary of the transaction, and then screening that UBO against global sanction lists to identify whether they or anyone they are close to is involved in illicit activities.
John concludes: “Our electronic verification system cuts through the corporate fog to get a clear picture of the ultimate beneficial owner quickly, giving you the peace of mind that you know exactly who your customers are.”
To find out more about SmartSearch's UBO service, click here.
*SmartSearch specialises in anti-money laundering checks