After a massive leak of financial data revealed how London is a key destination of choice for some of the world’s richest and most powerful people to conceal their cash, transparency advocates are calling on Britain to strengthen the country’s defenses against money laundering and tax avoidance.
The cache of nearly 12 million files allegedly shows how wealthy people all over the world set up offshore companies to buy property and avoid taxes.
Foreign individuals identified as beneficiaries of these types of offshore accounts in London include Jordan’s King Abdullah II, Azerbaijan’s President Ilham Aliyev, and Pakistani Prime Minister Imran Khan’s associates. Abdullah has denied any wrongdoing, and Khan has stated that his government will investigate anyone named and take appropriate action if wrongdoing is discovered.
Though the purchases are legal under British law, they highlight the complicated — and often anonymous — financial practices employed by wealthy individuals to avoid taxation, which are far removed from the everyday experience of the majority of the British population.
London is a popular destination for the wealthy and powerful because it is home to a sophisticated ecosystem of businesses that can assist in the process, such as creative wealth management firms, high-end lawyers, and long-established accounting firms. According to a 2019 report by the transparency organization Global Witness, approximately 87,000 properties in England and Wales were owned by anonymous companies registered in tax havens.
According to the report, 40 percent of the anonymously owned properties identified were in London, with a total value of more than 100 billion pounds ($135 billion). Popular areas were said to include the boroughs of Westminster, which houses the United Kingdom Parliament, Camden, and Kensington and Chelsea.
For years, the London property market has struggled to shake a reputation for playing a key role in how wealthy people around the world seek to conceal and accentuate their wealth, with many prime properties in the city’s heart owned by non-nationals. Russian oligarchs, for example, have been prominent buyers of London real estate in recent years.
For decades, the government of the United Kingdom has advocated for a light touch approach to regulation in order to attract foreign capital and talent. According to critics, this has served as a magnet for both legal tax evasion and more criminal activities such as money laundering. The disclosures, according to Duncan Hames, policy director at the campaign group Transparency International U.K., should serve as a “wake up call” for the government to implement long-overdue measures to strengthen Britain’s defenses against what he calls “dirty money.”
“These leaks demonstrate that there is one system for corrupt elites who can buy access to prime property and live luxurious lifestyles, and another for honest hardworking people,” he said. “Once again, Britain has been exposed as an enabler of global corruption and money laundering, with the same loopholes exploited to funnel suspect wealth into the country.”
Transparency International U.K. is urging the government to close a loophole that allows companies based in the United Kingdom’s offshore financial centers, such as the British Virgin Islands and the Cayman Islands, to hold property in the country without having to reveal the identities of their true owners.
It also wants the government to crack down on professionals who assist those with illicit wealth in moving and hiding their cash in the United Kingdom, as well as properly resource the National Crime Agency to go after those suspected of making their money through crime and corruption.
Treasury Secretary Rishi Sunak stated that the Pandora Papers will be investigated by the British tax authorities. He defended the country’s record on combating tax evasion.
He cited the Conservative government’s efforts over the last decade to improve transparency — who owns what — and data exchange between tax authorities.
“As you’ve seen in the papers, it’s a global problem with a global dimension, and we need other countries to work with us to address it, but we’re determined to do so,” he added.
Sunak also stated that there is “always more we can do” when asked about reports that half of all Russian money laundering occurs in the United Kingdom. Opposition parties said the revelations, which also raised questions over donations given to the Conservative Party, needed to be acted on urgently by the U.K.’s Conservative government.