London property boom fueled by dubious funds
Sherlock Holmes would have enjoyed the irony: a major, international crime committed right on his own doorstep. Real estate next to 221B Baker Street, London home of the world-famous fictional detective, may have been used to launder more than $200 million of illicit cash. Campaigners at the anti-corruption group Global Witness made the discovery .
Chido Dunn
“We found that big chunks of Baker Street — all the property surrounding the Sherlock Holmes Museum — is owned by someone with close links to Rakhat Aliyev,” says investigator Chido Dunn.
Aliyev has been called “the Moriarty of money laundering”: He was the head of the secret police in Kazakhstan and is reputed to have looted billions from the Kazakh treasury, hiding it abroad before dying in mysterious circumstances in an Austrian prison cell. It is, perhaps, not surprising that he or his associates would park their cash in London.
“London has been a money laundering center of choice for many, many years,” says John Christensen, an anti-tax evasion campaigner.
He alleges that successive United Kingdom governments have turned a blind eye to dodgy foreign cash laundered through British overseas territories like the Cayman Islands, Turks and Caicos Islands, Bermuda, and the British Virgin Islands, and that so much money has come into London, it’s even affected the capital’s property prices.
“Very large inflows of dirty money mingled with large inflows of clean money have inflated London property markets to the point where the market is quite simply unaffordable to the large majority of ordinary Londoners,” he says.
John Christensen
The precise scale of the inflow of dodgy cash is difficult to gauge, but here’s a rough indicator: Almost $200 billion has been pumped into British real estate anonymously by foreigners operating through overseas tax havens. A lot of this money has been invested in luxury apartment blocks, which often lie empty.
“Seventy-five percent of the new blocks are unoccupied,” says housing activist Andrew Barshall. “They are simply a hiding place for dirty money, for foreign tax dodgers, money launderers and drug dealers.”
Barshall claims the influx of foreign cash is forcing some of London’s poorer residents out of the city, and he cites the planned redevelopment of the Sutton Estate in Chelsea as yet another example of this.
The estate — a cluster of fine, old red-brick apartment blocks in one of London’s most expensive districts — was built with the legacy of a Victorian philanthropist, William Sutton, who left his money to provide low-cost accommodations in nice neighborhoods for London’s working poor.
Andrew Barshall (L) and Ian Henderson.
Barshall argues that a plan to demolish and rebuild the estate in order to cash in on London’s rising property prices will betray Sutton’s charitable intentions.
“Some of the poorer residents will be sent to live outside London, and 40 percent of the accommodation will be turned into multimillion pound luxury, apartments,” he says. “What we’re seeing is nothing less than the social cleansing of the working poor from the center of the city.”
The housing association that runs the Sutton Estate and the local council both insist they need the extra funds from the redevelopment to provide and maintain more affordable accommodations.
But Britain’s central government does seem to be worried about the impact of illicit money on London housing. The prime minister is mulling over a new measure that will make it mandatory for anyone buying real estate in Britain to be identified.
That won’t save the Sutton Estate. It won’t stop the city’s house-price boom. But it may help to cool it by stemming the flow of laundered cash into London property.
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