London property market a ‘welcome mat’ for money laundering - 100 Billion Pound Annually.

Latest: Corruption and Money Laundering.

London property market a ‘welcome mat’ for money laundering.

MPs are calling for urgent action to end the UK’s ‘safe haven’ for £100bn of money laundering annually, claiming that key tool for detecting suspicious financial activity across the financial services sector and connected industries, such as real estate, is overloaded to the point of being ‘completely ineffective’.

A highly critical report from the home affairs select committee says poor supervision and enforcement in the London property investment market have ‘laid out a welcome mat’ for laundering the proceeds of crime. It calls for much stronger supervision of agents, buyers and sellers. The committee says it is ‘astonishing’ that just 335 out of some 1.2m property transactions last year were deemed to be suspicious.

The report noted: ‘At the moment it is far too easy for someone intent on laundering money to buy a property with their ill-gotten gains, and rent it out in a very buoyant and robust letting market, and take in clean money in perpetuity.

‘We recommend that, as with estate agents and other professional services, letting agents must use the Suspicious Activity Reporting regime (SARS) system and undertake appropriate due diligence when taking on new clients.’

However, the report also slates ELMER, the system used by the financial services industry to report suspicious activity via SARS, as ‘not fit for purpose’.

The committee found the ELMER system currently processes 381,882 SARs despite being designed to manage only 20,000 and, of this figure, only 15,000 looked at in detail.

It states: ‘We have reminded the government time and again that it must be replaced. The failure of ELMER has made the SARs system a futile and impotent weapon in the global fight against money laundering and corruption.

‘We note that the government has finally given a commitment to make the system work in this year’s Queen’s Speech, although we have yet to receive details of how this will be achieved. An effective regime to help organisations report suspicious financial activity must be introduced without further damaging delay.’

The committee calls for the creation of a specialist 'confiscation court' to combat what it describes as ‘the current lack of interest and expertise in confiscation orders among prosecutors and judges’. It wants the government to set up a dedicated, specialist court to hear complex cases featuring cross-border financial transactions, use of corporate vehicles or very high value proceeds.

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