Is the UK a safe heaven for dirty money

Inward investment helps the UK property industry massively and it arrives from all corners of the world. You can look at this two ways – firstly it is securing the development of a whole host of schemes, particularly in the North, but on the flip side a proportion of the money comes from anonymous shell companies.

 

David Cameron famously in July cast a dark shadow over the industry by saying “the UK must not become a safe haven for corrupt money from around the world and that there is no place for dirty money in Britain.” Well it certainly is a broad sweeping statement that certainly must annoy people because let’s be honest most offshore money is not dirty but strategically placed funds to maximise tax efficiencies but he is right that undoubtedly there will be elements who use the UK property market, particularly high-end residential, to launder the cash.

 

Over the last 14 years it has been analysed that £262.9bn has transacted with a considerable uptake in the last three years.

 

The NCA recently produced a report based on a Land Registry database of property in England and Wales owned by offshore companies. This data highlights that back in 2000 there was £2bn investment from offshores which has exponentially grown to c£30bn in the last three years. Most of this investment heads into London but there is an increasing percentage heading to the regions – take the recent visits to China, where a number of Northern developments including Scarborough Group’s Manchester residential scheme and CEG’s Kirkstall Forge were showcased. Money from an offshore vehicle is not by default dirty. In fact a large number of countries around the world have regulation in place which should by default protect the process. However some individuals/foreign companies may set up an offshore vehicle to be as tax efficient as possible, for examples Jersey. In the UK disclosure of beneficial owners are mandatory upon registration of a company, while Jersey the records aren’t publicy available but accessible by law enforcement. Jersey, which contributes £85bn (32%) of the total represents a relatively safe territory. A way forward to provide the security needed to ensure the funds arriving onshore are sage would be to make ownership more transparent which will create a first line of defence – having principle based regulation with constructive oversight and audit. This shouldn’t damage the international reputation, if carefully managed, and provide more security to all parties.

 

 

Feel free to contact me 0113 288 2276 or lee.a.wilkinson@uk.pwc.com if you wish to discuss this blog or anything relevant to property and construction.

 

Enjoy the weekend

Lee