Dirty Money in London’s Property Market

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In February 2018, the shocking case of Zamira Hajiyeva and her wealth caused upheaval in British tabloids. She is the wife of Jahangir Hajiyev, the prominent jailed Azerbaijani chairman of the state-controlled International Bank of Azerbaijan from 2001 to 2015. Hajiyeva was said to have spent 16 million pounds at Harrods from 2006 to 2016 with just 600,000 pounds in one single day and 30,000 pounds on chocolates in one single afternoon. However, what really sparked a full investigation into Hajiyeva’s source of money was her house in London’s Knightsbridge and golf club in Berkshire valued at 22 million pounds and the offshore companies in the British Virgin Islands used to acquire such properties.

This was the first case that used the new unexplained wealth orders, part of the so-called McMafia laws (named after a nonfiction book and BBC TV drama of the same name) which allowed authorities to investigate illegal finance flowing into the United Kingdom (U.K.). Hajiyeva has been in custody since October of last year.1

These recent laws are a response to the widespread crime and money laundering that has had a profound impact on London’s property market in recent years. The case of Hajiyeva—despite the amount of consternation it had caused—was nothing new.

The Money Laundering Center of the World Drug Trade

In 2016, the Home Affairs Select Committee stated that London’s property market is a “primary avenue for the laundering of £100 billion of illicit money a year.”2

Properties in posh areas of the city, such as Westminster, Kensington and Chelsea, are being acquired by criminals and often left empty, helping to inflate the already high prices of houses in the British capital.3 The illicit money is then cleaned through the sale of such properties or through rent.4

Another important area of London is known as The City, as it is London’s financial district. Home to the headquarters of global enterprises such as Lloyds Banking Group and Unilever, the City has been dubbed “the money laundering center of the world’s drug trade” by prominent newspaper The Independent. Its 1.2 square miles of lenient financial laws has allowed money launderers heavy influence on the property market due to its low council tax. For example, a 10-million-pound mansion would cost less than 1,000 pounds in council taxes per year. In comparison, a mansion with the same price in New York would cost $225,000 in property taxes yearly.5

However, the City’s lax taxation is not the sole legislative mishap to blame. Buying property in the company’s name instead of an individual is another legislative factor that has profoundly influenced the injection of illicit money in London’s property market. “If you’ve got money in whatever country—China, Russia or Saudi Arabia, for example—and you want to make that money legitimate, you buy that property in the UK in the name of the company,” says Kyle Phillips of the law firm Fieldfisher.6

Many such companies are found in offshore tax havens and secrecy jurisdictions. The money—often moved through complicated and non-transparent corporate structures with no public records—makes it impossible to know the sources of funds, let alone gather any information regarding its beneficial owners.7 Various such jurisdictions are actually part of Her Majesty’s British Overseas Territories and Crown dependencies, like Jersey and the British Virgin Islands, which make up 25% of the world’s tax havens.8

Problems in the Battle Against Money Laundering in Real Estate

Laws, regulations and regulators up until this point have been too lenient and uncoordinated in the battle against money laundering in real estate.

A major problem is regulators. Her Majesty’s Revenue and Customs (HRMC)—the U.K. governmental department responsible for the collection of taxes—needs to take stronger action against money laundering. Real estate agents have often been described as the “weak link” in anti-money laundering (AML) defenses as they are often being unsupervised and faintly regulated.9 Yet, only 55 cases of money laundering breaches by estate agents were investigated by the HMRC in the past six years.10

The governmental department’s investigations following the Panama Papers scandals do not look much better. Only six interviews under caution and four arrests were carried out. When asked to explain the reason for such lightness, the HMRC explained that it preferred using “fear of reputational damage in custodial sentences” in private negotiations rather than directly prosecuting “wealthy and prominent members of the community.” 11

But the HMRC cannot be blamed alone. According to Prem Sikka, professor of accounting at the University of Sheffield, a big problem lies in the fact that there are too many money laundering regulators in the U.K.—25 in total. “There’s virtually no co-ordination,” says Dr. Sikka, “they work to different benchmarks and different priorities, and the finger is routinely pointed at lawyers and other intermediaries.”12

Enter the Economic Crime Plan 2019-22

However, a seed of hope was planted last July 12 when the U.K. government developed the Economic Crime Plan 2019-22. The plan aims to take action in seven key areas that need strengthening and reform in the fight against financial crime, ranging from implementing the Fifth AML Directive to reforming the suspicious activity report regime. The following are a few of these key areas that will benefit the fight against money laundering in real estate:

  • Building better information-sharing platforms to increase public and private sector cooperation, including real estate.
  • The expansion of the Trust Registration Service for U.K. and non-European-Economic-Area trusts which acquire real estate in the U.K.
  • The creation (still in plan) of a “new global norm of accessible company beneficial ownership information that is linked across borders.”
  • Stronger coordination amongst the various regulators, including HMRC.13

The plan states that fighting international illicit financial flows is a top priority for the U.K. government. While it is not perfect, and much more needs to be done, the steps toward the right direction have already been taken. It will be implemented in the coming three years to change the fight against economic crime for the better. One hopes that the world of real estate will be shaken, disrupting money laundering and changing the lax regulations that have allowed it to flounder in the past years and prosecuting the many Zamira Hajiyeva’s that are still around untouched today.

Stefano Siggia, junior compliance assistant, Banca Monte Paschi Belgio S.A., Brussels, Belgium, stefano.siggia@montepaschi.be


  1. Lizzie Dearden, “Investigators probe £80m London properties linked to politically exposed person involved in serious crime, ” The Independent, May 29, 2019, https://www.independent.co.uk/news/uk/crime/london-money-laundering-unexplained-wealth-orders-mcmafia-a8933866.html
  2. “City of London – epicentre of the world’s crime scene,” TruePublica, September 28, 2018, https://truepublica.org.uk/united-kingdom/city-london-centre-global-crime-scene/
  3. Simon Jenkins, “London remains a safe haven for the world’s dirty cash,” The Guardian, October 11, 2018, https://www.theguardian.com/commentisfree/2018/oct/11/london-haven-dirty-cash-unexplained-wealth-orders-money-laundering
  4. Chris Stokel-Walker, “New data shows London’s property boom is a money laundering horror,” Wired, April 9, 2019, https://www.wired.co.uk/article/money-laundering-hmrc-tax-update
  5. “City of London – epicentre of the world’s crime scene,” TruePublica, September 28, 2018, https://truepublica.org.uk/united-kingdom/city-london-centre-global-crime-scene/
  6. Chris Stokel-Walker, “New data shows London’s property boom is a money laundering horror,” Wired, April 9, 2019, https://www.wired.co.uk/article/money-laundering-hmrc-tax-update
  7. “Corrupt money in the UK,” Transparency International, https://www.transparency.org.uk/our-work/corrupt-money-in-the-uk/
  8. Nicholas Shaxson, “The tax haven in the heart of Britain,” New Statesman, February 24, 2011 https://www.newstatesman.com/economy/2011/02/london-corporation-city
  • Ollie Williams, “British real estate agents hit by money laundering crackdown,” Forbes, March 11, 2019, https://www.forbes.com/sites/oliverwilliams1/2019/03/11/british-real-estate-agents-hit-by-money-laundering-crackdown/#5b8e89cb3c88
  • Chris Stokel-Walker, “New data shows London’s property boom is a money laundering horror,” Wired, April 9, 2019, https://www.wired.co.uk/article/money-laundering-hmrc-tax-update
  • Simon Jenkins, “London remains a safe haven for the world’s dirty cash,” The Guardian, October 11, 2018, https://www.theguardian.com/commentisfree/2018/oct/11/london-haven-dirty-cash-unexplained-wealth-orders-money-laundering
  • Chris Stokel-Walker, “New data shows London’s property boom is a money laundering horror,” Wired, April 9, 2019, https://www.wired.co.uk/article/money-laundering-hmrc-tax-update
  • “Economic Crime Plan 2019-2022,” GOV.UK., July 12, 2019, https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/816215/2019-22_Economic_Crime_Plan.pdf