How did London become ground zero for the global plutocracy?

Peter Apps is the executive director of PS21. He tweets: @pete_apps.

Talk to someone who cares about corruption in Pakistan or Nigeria, however,
and they tend view London rather differently: as the central focal point for
much of the corruption in their own countries.
In his 2011 book Treasure Islands, Nicholas Shaxson identifies another unique
advantage the capital has: its position at the heart of a wider network of
offshore trading centres with much looser rules. The Channel Islands, British
Virgin Islands and others all offer a much lower degree of scrutiny, while still
providing a degree of official protection.
London also benefits from its long-term historical connections with the world's
other great financial trading centres. Many of them Hong Kong, Shanghai,
Dubai, Singapore were themselves founded by London financiers. This
network is the backbone for much of the legitimate trade on which the global
economy depends. But it is also remarkably useful when it comes to
facilitating corruption.
There is another awkward truth to consider. No matter how many people the
British government pays to try to clamp down on activities like tax evasion or
corrupt financing, there are almost certainly going to be more and better paid
people working to circumvent it. Some of them may be working only a couple
of miles away on the other side of the city.
And that, of course, is if the British government regarded tackling such
activities as a priority at all. It doesnt.
Crunching the numbers
Exactly how much of London's real estate market is actually dodgy is hard to

estimate. In July last year, estate agents Savill's said that foreign buyers
accounted for 32 percent of all sales in the capital. The majority of those,
however, were people resident in London, buying a home to live in (37 per
cent of Londoners, after all, were born overseas).
In fact, according to the Savill's numbers, only 7 per cent of transactions in
London came from buyers actually resident overseas. But at the top end of
the market, that number appears to be much, much higher. A survey by
fellow estate agents Knight Frank found that, when it came to properties
worth 1m or more, the proportion of non-resident foreign buyers was
roughly a quarter.
In 2011 3.8bn worth of UK property was bought by companies based in
British Virgin Islands alone

Anecdotal evidence suggests that, the more expensive the property, the
more likely the buyer is to be from overseas. The very top of the market is
dominated by Russian, Middle Eastern and, increasingly, Chinese buyers.
Since 2004, according to Transparency International, UK property worth more
than 180m has been brought under criminal investigation as the suspected
proceeds of corruption. According to its analysis of data from the Metropolitan
Police, in over 75 per cent of these cases, the owners used some form of
offshore corporate secrecy such as a front company based in a tax haven.
The price of the properties included on this list varied wildly, from 130,000
to 9m. But the average was 1.5m and nearly half (48 per cent) were
valued at over 1m.
In all, Transparency International's analysis of the Land Registry data showed,
almost 10 per cent of properties in the City of Westminster were now owned
by offshore haven companies; so are 7.3 per cent of those in neighbouring
Kensington & Chelsea. Of these, 38 percent were registered in the British
Virgin Islands, 16 per cent in Jersey, 9.5 per cent on the Isle of Man and 9 per
cent in Guernsey.
In 2011, 3.8bn worth of UK property was bought by companies based in
British Virgin Islands alone.
What to do?
Property has always been the money laundering option of choice for a certain

level of wealth. Just as drug dealers and brothel operators use bars, nail
salons and car washes all businesses which operate mainly in cash, and can
therefore be used easily to justify revenue much wealthier crooks have
always bought property.
The Corporation of London was the only part of the country not covered by
the Domesday Book

And London isnt the only place where corrupt real estate is a problem: for all
the attention of the US has devoted to clamping down on terrorist funding
over the last two decades, its own rules are scarcely tighter than Britain's.
Indeed, it is still possible to buy a property with cash in the US, with
remarkably little proof of identity or the source of your funds.
Loose corporate governance in some states particularly Delaware allows
them to operate within the US system much as Caribbean and Channel
Islands tax havens do within the British. Miami, in particular, has a reputation
for being a hotbed of dubious real estate deals.
Both countries have certain red lines. In the years since 9/11, theyve made it
remarkably difficult for militant groups to pass money through any part of the
Western banking system. Until the nuclear deal with Iran earlier this month,
theyd been remarkably successful at targeting the front companies to Tehran
was using to access the global economy, too.
Tackling high-level political corruption in other countries, however, has never
received close to the same priority. In June 2014, Transparency International
published 10 principles which they say UK money laundering rules should
take into account in order to tackle corrupt capital. Its striking both how little
traction those demands have got and how few calls for that kind of action
there have been.
Londons unmanageability is nothing new. The British government has always
struggled to control the citys commercial activities indeed, the Corporation
of London was the only part of the country not covered by the Domesday
Book of William the Conqueror, and that was in 1086.
Perhaps it isnt surprising, either. As long as the tide of foreign money
sweeping into London is one of the factors pushing up property prices, there
is relatively little appetite to change anything. At the end of the day, a very
large number of people in the capital stand to benefit from London's growing
reputation as the centre of the world for the global elite. As long as it remains
one of the world's pre-eminent cities, will probably also remain one of its
biggest cesspools, too.

This piece originally appeared on Citymetric on July 28, 2015.

PS21 is a non-ideological, non-national, non-governmental organization. All
views expressed are the authors own.