(Bloomberg) -- The U.K. property market is increasingly a prime target for money laundering, with London's most expensive homes attracting criminal buyers as a way to hide dirty cash.
There's now a high likelihood of buyers using U.K. real estate to disguise illegal activity, up from a medium risk three years ago, the U.K. government said in a December report assessing money laundering and terrorist financing this year. The findings also upgraded the risk to the estate agency sector to medium.
“It is likely that criminals favor locations with high value properties such as London, Edinburgh or university towns, with London in particular considered highly desirable for overseas entities to operate a residential or commercial base in,” the report said.
The Covid-19 pandemic has only made the sector more vulnerable to dirty money, as shaky demand for extravagant homes increases the chances of getting a discount. While criminals may also exploit struggling businesses to obtain real estate sold out of desperation or bankruptcy, residential property is seen as a higher risk than commercial, aided by the speed and ease of deals, the report found.
Transactions made by corporate structures or trusts in tax havens such as the Cayman Islands make the practice difficult to track -- three quarters of properties linked to corruption are owned by companies registered in such locations, according to Transparency International.
The NGO has found over 500 properties in the U.K. that have been bought with suspicious wealth, with a combined value of over 5 billion pounds ($6.6 billion), the report said. That's probably only a fraction of the real value of dirty money hidden in U.K. real estate, it added.
In a crackdown on overseas corruption, the wife of a jailed Azeri banker must give British authorities information on her assets after losing a Supreme Court challenge to a so-called unexplained wealth order. Zamira Hajiyeva can no longer sell nor transfer a golf club outside London and her home near luxury store Harrods, which the National Crime Agency said Monday are worth more than 22 million pounds.
Read more: Mystery Banker's Wife Unmasked in Fight for Golf Club, Home
The U.K. also had a victory in an attempt to crack down on dirty money in October, when the National Crime Agency used the controversial power to come to a 9.8-million-pound settlement with a Leeds businessman over accusations including criminal ties to build a property portfolio. Mansoor “Manni” Mahmood Hussain handed over more than 45 properties across the country, including two apartments in the swanky Knightsbridge neighborhood of London.
©2020 Bloomberg L.P.
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