Secret companies allow corrupt cash to flood the biggest real estate markets

New report identifies top 10 money laundering loopholes

Issued by Transparency International Secretariat



Transparency International said today that the governments of Australia, Canada, the UK and the US need to close glaring legal loopholes to prevent the corrupt elite from laundering the proceeds of grand corruption in their local real estate markets.

In a new report, Doors Wide Open: Corruption and Real Estate in Key Markets, Transparency International identifies the ten main problems related to real estate and money laundering in those four countries and makes recommendations on how to address them.

The report focusses on four countries that are known hot-spots for the corrupt to invest and launder money.

“Governments must close the loopholes that allow corrupt politicians, civil servants and business executives to be able to hide stolen wealth through the purchase of expensive houses in London, New York, Sydney and Vancouver,” said José Ugaz, Chair of Transparency International.

“The failure to deliver on their anti-corruption commitments feeds poverty and inequality while the corrupt enjoy lives of luxury,” Ugaz added.

Real estate has long provided a way for individuals to secretly launder or invest stolen money and other illicitly gained funds. According to the Financial Action Task Force (FATF), real estate accounted for up to 30 per cent of criminal assets confiscated worldwide between 2011 and 2013.

Not only do expensive apartments in New York, London or Sydney raise the social status of their owners and allow them to live in luxury, they are also an easy and convenient place to hide hundreds of millions of dollars from criminal investigators, tax authorities or others tracking criminal behaviour and the proceeds of crime.

The anti-corruption group found that despite anti-corruption promises by government in the countries covered in the report, current rules and practices have failed to detect and prevent money laundering in the real estate sector.

Strikingly, Australia, Canada and the US rely almost exclusively on banks to stop money laundering, even though a slew of middlemen including real estate agents, accountants, tax planners, lawyers and others participate in deal-making. This makes all-cash deals, which do not require the involvement of a bank and which represent a significant proportion of high-end sales made to overseas investors, especially difficult to track.

Only the UK requires that checks are made on people selling real estate in order to identify suspicious activity and identify the real owners of the property. However, the same checks by real estate agents are not required on the buyers – where the highest risk of money laundering exists – leaving a gaping hole in the sector’s defences against corrupt money.

The report also finds that offshore companies pose a serious risk in all four countries because they are able to purchase property without needing to disclose any information relating to who ultimately owns and controls them to any government authority. The UK has committed to establish a registry to collect and publish this information.

None of the countries analysed have tests in place for professionals working in the real estate sector in order to assess whether they are aware of their anti-money laundering obligations. Very little information is published regarding any sanctions applied to real estate agents, lawyers, accountants and notaries for facilitating money laundering into the real estate sector.

 Transparency International makes the following recommendations:

Click here to access the report and the full list of the top 10 money laundering loopholes.


For any press enquiries please contact

Chris Sanders
T: +49 30 34 38 20 666
E: .(JavaScript must be enabled to view this email address)

Latest

Support Transparency International

Antoine Deltour: LuxLeaks whistleblower’s long legal battle continues

On Thursday 23 November, the High Court of Luxembourg will announce its verdict in the case of Antoine Deltour, the whistleblower who revealed aggressive tax avoidance schemes in Luxembourg by sharing the 'LuxLeaks' documents with journalists in 2014.

Open letter to the President of Equatorial Guinea: Ramon Esono Ebalé must be released

It has been two months since the artist and satirist Ramon Esono Ebalé was detained without charge in Equatorial Guinea. Transparency International joined with 17 organisations and individuals to write to President Teodoro Obiang Nguema Mbasogo. We are calling for his immediate release.

Global Corruption Barometer: citizens’ voices from around the world

Transparency International believes that people’s experience and perceptions of corruption are key for understanding corruption risks around the world. Our Global Corruption Barometer is the world's largest survey asking citizens about their direct personal experience of corruption in their daily lives - check it out here!

How the Honduran military and police profit from the illegal arms trade

An investigation by InSight Crime and Transparency International Honduras has found that many of the guns used in homicides in Honduras come from Honduran military and police stockpiles.

#ParadisePapers: time to clean up the offshore financial havens

The ‘Paradise Papers’ show how the rich and powerful around the world are able to avoid paying tax and keep their business dealings secret. The mechanisms they use can also benefit the corrupt, and must be made more transparent.

Uzbekistan: How to support the real victims of grand corruption

What do you do when assets stolen from a country’s state coffers by corrupt individuals have been recovered and can now be returned to the country - but the government is still controlled by corrupt people? That’s the case of Uzbekistan, one of the most corrupt countries in the world.

Entrevista con testigo clave en el Caso Obiang: Delfin Mocache Massoko

En el 27 de octubre 2017, la justicia francesa ha condenado a Teodoro Nguema Obiang Mangue, vicepresidente de Guinea Ecuatorial, a tres años de cárcel extentos de cumplimiento, una multa de 30 millones de euros (US$35 millones) y confiscó todos sus activos en Francia. Antes de que se anunciara el veredicto, entrevistamos a Delfin Mocache Massoko, un testigo clave en el caso, para descubrir qué significa el juicio para él y los ciudadanos de Guinea Ecuatorial.

Social Media

Follow us on Social Media

Would you like to know more?

Sign up to stay informed about corruption news and our work around the world