7 Sep, 2019
Transparency.org: Three ways to stop money laundering through real estate
Source: Transparency.org 6 September 2019 – Around the world, buying property is a favourite method for the corrupt to launder their ill-gotten gains.
When corrupt officials take large bribes, embezzle funds or otherwise steal money from the countries they are meant to serve, the money usually has to be cleaned before it can be enjoyed. As well as offering the trappings of luxury and symbols of status, property bought with dirty money can be sold, effectively disguising the corrupt origins of the funds. In some places in particular, it is easy to hide the real owner of a property: anonymous companies can be used to purchase property, meaning even law enforcement don’t know who owns the house next door.
Doors wide open: corruption and real estate in four key markets (2017).. Read more.
Rich countries are often the recipients of illicit investment. According to our research, at least £4.4 billion (US$5.5 billion) worth of property in the UK has been bought with suspicious wealth. In Germany, around US$30 billion of money with unclear origins entered the real estate market in 2017 alone. In Canada, at least CAN$20 billion (approx. US$15 billion) appears to have entered the housing market in the Greater Toronto Area over the past 10 years without oversight from anti-money laundering authorities.
Investigative journalists and law enforcement investigations have exposed how corrupt officials take advantage of loose regulation of the property market.
Zooming in on West Africa highlights some shocking examples. In 2017, Teodorín Obiang, the Vice-President of Equatorial Guinea, which has one of Africa’s highest poverty rates, had his €107 million (US$118 million) mansion in Paris confiscated after he was found guilty by a court in France of money-laundering and embezzlement. President Obiang, Teodorin’s father, currently hosts Yahya Jammeh, the exiled former president of The Gambia, who together with his associates stole nearly US$1 billion from state resources during his time in power. Jammeh and Obiang owned luxury mansions next door to each other in Maryland, USA.
James Ibori, former governor of Delta State in Nigeria between 1999 to 2007, was sentenced to 13 years in prison after admitting fraud of nearly £50 million (US$66 million). The judge in the case said that this figure is ludicrously low and that the real amount may be in excess of another £200 million (US$245 million). Ibori used shell companies in multiple secretive jurisdictions to move the funds, which ended up in property and luxury goods around the world.
The glitzy foreign mansions of presidents and high-powered officials might make the headlines, but that’s not the entire story. In Zambia, in southern Africa, mystery surrounds the ownership of 48 apartments in the capital, Lusaka. There are suspicions that they are being used to hide money stolen through corruption.
However, there are concrete measures that make it significantly more difficult for the corrupt to stash their dirty money in property.
Asset Declarations
More transparency about what public officials own makes it harder for them to secretly amass wealth in office through corrupt practices. At the very least, it allows activists and the media to ask, “How did you afford that mansion on your public salary?”
Public declarations of assets before and after officials are in office should be universal practice. In Sri Lanka, we’ve worked with members of parliament to take historic steps towards such disclosures becoming the norm.
Regulating gatekeepers
Real estate transactions are rarely between just the buyer and seller. Agents, banks and brokers all play their role, and have opportunities to stop corrupt money entering the market. In Ibori’s case, his London-based solicitor helped him set up the elaborate company structures that allowed him to siphon money out of the state coffers.
Money laundering through real estate is much harder when these professions act with integrity and are required to conduct checks on the real owner and the source of funds. They should have access to all the information they need, and should face consequences for not flagging suspicious transactions.
Land Registers
Finally, a central register online that simply shows who owns what property would go a long way to creating greater accountability over the origins of money in the market, particularly when it includes the names of real beneficiaries of the property. This would make investigations by journalists and civil society much easier, and also help law enforcement join the dots as they pursue cases.
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