As the fallout from the leaked Panamanian tax papers continues many are starting to ask questions about money-laundering and the impact this may have on the London property market. This is not the first time that some experts have questioned the ever increasing demand for London property and the fact that many underlying owners of properties in and around London are never revealed. This then begs the question, if you don’t know the underlying owners of the shell company investment vehicles then how can they be money laundered?
Before we look at the situation regarding underlying property owners via investment vehicles such as shell companies it is worth noting that companies are in fact legal entities in their own right. The UK already has sufficient regulations in place to ensure that those influencing the decisions made by any companies have their identities checked and abide by money-laundering regulations. Perhaps the problem starts to arise when you look towards some overseas tax havens which are maybe not as strict with regards to paperwork and money-laundering regulations as the UK authorities?
Is money-laundering really a problem for London?
The fact that money-laundering is strictly illegal makes it very difficult to estimate with any real confidence the amount of money invested in London property which may be from illegal sources. Therefore it is also impossible to estimate the impact any funds from dubious sources may have had upon London property prices. However, what we can say with some confidence in light of the Panamanian tax papers is that some company directors/owners acquiring property in London may not have been able to acquire the same properties in their own names.
The issue of money-laundering is something which has been a major problem for the financial markets for many years. Varies UK governments have introduced a whole array of money-laundering regulations which have certainly reduced the flow of dubious funds into various markets. Will the authorities ever be able to remove all dubious funds from worldwide investment markets?
The UK authorities have already given a number of high-profile financial companies in the UK notice that they need to confirm any relationship with various companies in tax havens such as Panama. This will allow financial giants in the UK to confirm the situation and remove any uncertainty although it may well give the tax authorities food for thought in the future.
It seems inconceivable that we will not see some kind of financial penalties cast upon companies and individuals found not to have followed UK regulations regarding money-laundering and other aspects of property investment. However, how hard will the authorities come down?
Due to the very nature of money laundered funds it is difficult to say with any real confidence how much has been invested in the London property market and the impact this may have had on prices. The introduction of greater transparency across various tax havens will help in the longer term with tax authorities around the world also keen to go through the 11 million leaked documents with a fine tooth comb. Will we see any high-profile companies and individuals put in the dock by HMRC?