Crackdown on Russia’s ‘London laundromat’ as bill rushed through parliament

RICS says members should consider ‘risk to reputation, the reputation of the profession and the public interest’ when dealing with buyers

Russia protest

Moves to crack down on Russian money in London are taking shape amid continuing anger at the level to which governments have allowed the capital to be used to launder cash from around the world.

The latest property market analysis by London estate agent Benham and Reeves has revealed that Russian residential property purchases contributed an estimated £190m in market value in 2021.

Some 82,305 residential property sales took place across the London market last year to the tune of £5,555.7bn in market value, while a further 13,016 transactions took place for additional purchases such as second homes and buy-to-let investments.

It’s thought that approximately 30% of this market activity was attributed to international buyers, with Russian buyers accounting for 1% of all market activity.

Benham and Reeves director Marc von Grundherr commented, “Russian activity has long contributed to the overall health of the London property market, with Russian buyers traditionally prevalent within prime London neighbourhoods.

“However, this certainly looks set to change following our swift implementation of economic sanctions against Russia and while an initial exodus is already materialising, we can expect this segment of international buyers to dwindle as assets are frozen, the Iron Curtain falls once again, and the Russian economy continues to disintegrate at some pace.”

‘Extremely careful approach needed’

The Royal Institution of Chartered Surveyors (RICS) says it backs the move strengthen anti-money-laundering rules by introducing a register of foreign owners of UK property.

“The requirements in the global professional statement ‘Countering bribery, corruption, money laundering and terrorist financing’ include the need to check if a potential customer or client (or their ultimate beneficial owner) is under any relevant sanctions that would prohibit you from establishing a business relationship with them,” RICS said in a statement.

“Given the crisis, firms should review their anti-money-laundering policies in light of the increased risks. In particular we would strongly suggest that firms and members adopt an extremely careful approach to due diligence checks.

“Members and firms should consider the risk to their reputation, the reputation of the profession and the public interest in deciding whether to accept instructions from specific clients.”

Tom Bill, head Of UK residential research at Knight Frank, says greater transparency over the beneficial ownership of property is something that pre-dates the current conflict and that rules have been getting tighter in many property markets around the world as governments seek more oversight of the growing cross-border flow of capital.

“At the same time, the current conflict underlines London’s safe haven credentials. This is particularly true within Europe, with capital from the continent already targeting the UK residential market. From countries further away, the conflict may cause some hesitation around Europe as a whole depending on how long it lasts,” he added.

Deadline reduced from 18 months to 6 months

Meanwhile the Economic Crime (Transparency and Enforcement) Bill is being rushed through Parliament.

A series of amendments have been made to help streamline the current legislation so the UK government can respond even more swiftly and effectively to the current crisis in the way individuals are sanctioned.

The Government has also brought forward amendments to shorten the deadline for overseas companies to register their beneficial owners from 18 months to 6 months.

The move will help crack down on money laundering through UK property, whilst giving people who hold their property in overseas entities for legitimate reasons appropriate time to comply with the new requirements.

“The vast majority of the beneficial owners of entities holding properties on the register will be entirely law-abiding companies and individuals,” the Government said in a statement.

“A six-month transition period strikes a balance in allowing for the free enjoyment of property and maintaining the UK’s reputation as a stable investment environment whilst ensuring property owners register their beneficial owners.”


What's your opinion?

Back to top button