6 ms·

It’s about time, this has been a serious issue in the UK. I think it was the BBC that did a program a few years ago with an undercover reporter pretending to b

It’s about time, this has been a serious issue in the UK. I think it was the BBC that did a program a few years ago with an undercover reporter pretending to be a corrupt Russian government official buying London real estate to launder their stolen gains. The undercover reporter would go to see various flats with intent to purchase, and “admit” to the sales agents flat-out that he worked for a Russian health care office, processing billions of pounds worth of funding, and siphoned a little off for himself. He’d then say he needed to know how to close on a property in such a way to hide his true identity. Without fail every single realtor gave him advice how to set up a shell company or which law firms he could contact that would do it for him by not asking all the required questions. Even after the BBC called those estate agents and law firms to say they were duped, that the buyer was an undercover reporter, and if they had any comment, most refused to even acknowledge any wrongdoing. Despite the undercover buyer clearly indicating the funds were stolen.

flatfilefan 8y ago
It sounds like there is more to this story than just some companies (or corrupt officials behind them) buying and selling the property in London. Could it be that US has found out many Russians seem to own property in UK but there is no way to coerce them in any other legal way?
- toyg 8y ago
  > US has found out many Russians seem to own property in UK Nah, it has been widespread knowledge for decades now. When Roman Abramovich bought Chelsea FC in 2003, the phenomenon was already well-known. London has been Oligarch Central pretty much since the Eltsin days. No, the real issue is that the UK government continues to struggle under public debt. Since 2010 they've cut every expense they can cut, so now they're trying to raise taxes. One of the avenues for new revenue (eh) is to close all the well-documented tax-code loopholes; and the most classic one is where you create Company X from a tax haven, make it buy property in London, then sell the whole company, bypassing all taxes that should be triggered by property sales. That's what this new law is really supposed to fight. It's actually not a terrible idea, and I say that as someone who actively despises the current government. Obviously it will likely end up favouring the sort of old-money connections that the Tory party naturally represents, people who cannot hide their wealth because they've literally owned most of the country for centuries; but if it brings home some much-needed cash and stems a bit the relentless flow of dirty money that keeps London fat and arrogant, so be it.
  - ghshephard 8y ago
    I wonder if you could combine that approach (having property owned by a company in a tax haven) with Prop-13 (in which property taxes grow very slowly if the property is not sold), and if anyone has ever done an assessment of how much property in California is owned by such entities.
    - google_censors 8y ago
      FinCEN is doing that in the larger metropolitan areas but they aren't publishing the data. They've been looking into real estate money laundering in the US on a larger scale for the past couple of years.
    - toast0 8y ago
      There's an exemption from reassessment if the California property is held in a real estate trust established by a financial institution, and the shares are sold. My understanding is that it's common for large commerical properties to be held in this fashion, such that they can be sold without triggering a reassessment. No tax haven required.
    - jeffwass 8y ago
      London doesn’t have the annual property taxes on held real estate that exist in the USA. There is a one-off stamp duty at purchase time. But if you buy a property, you can hold it without further taxes. *there is something called council tax, but it’s usually minimal, eg £2k max in many outer London boroughs, and in he case of rentals paid directly by renters.
    - jiveturkey 8y ago
      yes, that’s why a CA law was recently passed that when ownership of the real estate owning company changes hands, that is a) a change in ownership of the property and b) such changes must be reported to CA. unenforceable, eg there’s no way for CA to find out when foreign (non-CA owned) companies change hands, but at least the law is on the books.
      - 8y ago
JumpCrisscross 8y ago
> the BBC that did a program a few years ago with an undercover reporter pretending to be a corrupt Russian government official buying London real estate Would you happen to have a link?
- jeffwass 8y ago
  I think it was this one - “From Russia With Cash”. On Channel 4, not BBC. https://www.theguardian.com/uk-news/2015/jul/07/london-estate-agents-caught-on-camera-russian-buyer https://www.theguardian.com/uk-news/2015/jul/07/london-estat... Key quote about the motive for estate agents turning a blind eye to the clear admission of fraud : “Behind the deals, claims the documentary, lie easy profits for estate agents. If “Boris” had gone ahead with the purchases they stood to earn between £65,000 to £315,000 in commissions.”
ellius 8y ago
Not to nitpick, but if I remember correctly at least one of the realtors did become uncomfortable and shut down the whole thing. He was the exception, though.
scurvy 8y ago
It would be great if they did this in Miami, too.
- google_censors 8y ago
  I keep hoping that FinCEN's investigations actually start leading to some prosecutions. https://www.miamiherald.com/news/business/real-estate-news/article206232819.html https://www.miamiherald.com/news/business/real-estate-news/a...
cascom 8y ago
So let's say the buyer didn't go running his mouth about stealing the money, and didn't lie about who the beneficial owner was, how exactly is having his name as the beneficial owner of a property going to stop money laundering?
- james1071 8y ago
  The UK authorities have the power to ask people to explain where their money came from. So, if a former Russian public official is revealed to be the owner of a £10m property in London, he is at risk of having it confiscated.
  - beaconstudios 8y ago
    I wonder if the funds will be rightfully returned to the Russian government in cases of embezzlement.
    - james1071 8y ago
      unexplained wealth - money goes to UK govt.

flatfilefan 8y ago

It sounds like there is more to this story than just some companies (or corrupt officials behind them) buying and selling the property in London. Could it be that US has found out many Russians seem to own property in UK but there is no way to coerce them in any other legal way?

toyg 8y ago
> US has found out many Russians seem to own property in UK Nah, it has been widespread knowledge for decades now. When Roman Abramovich bought Chelsea FC in 2003, the phenomenon was already well-known. London has been Oligarch Central pretty much since the Eltsin days. No, the real issue is that the UK government continues to struggle under public debt. Since 2010 they've cut every expense they can cut, so now they're trying to raise taxes. One of the avenues for new revenue (eh) is to close all the well-documented tax-code loopholes; and the most classic one is where you create Company X from a tax haven, make it buy property in London, then sell the whole company, bypassing all taxes that should be triggered by property sales. That's what this new law is really supposed to fight. It's actually not a terrible idea, and I say that as someone who actively despises the current government. Obviously it will likely end up favouring the sort of old-money connections that the Tory party naturally represents, people who cannot hide their wealth because they've literally owned most of the country for centuries; but if it brings home some much-needed cash and stems a bit the relentless flow of dirty money that keeps London fat and arrogant, so be it.
- ghshephard 8y ago
  I wonder if you could combine that approach (having property owned by a company in a tax haven) with Prop-13 (in which property taxes grow very slowly if the property is not sold), and if anyone has ever done an assessment of how much property in California is owned by such entities.
  - google_censors 8y ago
    FinCEN is doing that in the larger metropolitan areas but they aren't publishing the data. They've been looking into real estate money laundering in the US on a larger scale for the past couple of years.
  - toast0 8y ago
    There's an exemption from reassessment if the California property is held in a real estate trust established by a financial institution, and the shares are sold. My understanding is that it's common for large commerical properties to be held in this fashion, such that they can be sold without triggering a reassessment. No tax haven required.
  - jeffwass 8y ago
    London doesn’t have the annual property taxes on held real estate that exist in the USA. There is a one-off stamp duty at purchase time. But if you buy a property, you can hold it without further taxes. *there is something called council tax, but it’s usually minimal, eg £2k max in many outer London boroughs, and in he case of rentals paid directly by renters.
  - jiveturkey 8y ago
    yes, that’s why a CA law was recently passed that when ownership of the real estate owning company changes hands, that is a) a change in ownership of the property and b) such changes must be reported to CA. unenforceable, eg there’s no way for CA to find out when foreign (non-CA owned) companies change hands, but at least the law is on the books.
    - 8y ago

JumpCrisscross 8y ago

> the BBC that did a program a few years ago with an undercover reporter pretending to be a corrupt Russian government official buying London real estate Would you happen to have a link?

jeffwass 8y ago
I think it was this one - “From Russia With Cash”. On Channel 4, not BBC. https://www.theguardian.com/uk-news/2015/jul/07/london-estate-agents-caught-on-camera-russian-buyer https://www.theguardian.com/uk-news/2015/jul/07/london-estat... Key quote about the motive for estate agents turning a blind eye to the clear admission of fraud : “Behind the deals, claims the documentary, lie easy profits for estate agents. If “Boris” had gone ahead with the purchases they stood to earn between £65,000 to £315,000 in commissions.”

ellius 8y ago

Not to nitpick, but if I remember correctly at least one of the realtors did become uncomfortable and shut down the whole thing. He was the exception, though.

scurvy 8y ago

It would be great if they did this in Miami, too.

google_censors 8y ago
I keep hoping that FinCEN's investigations actually start leading to some prosecutions. https://www.miamiherald.com/news/business/real-estate-news/article206232819.html https://www.miamiherald.com/news/business/real-estate-news/a...

cascom 8y ago

So let's say the buyer didn't go running his mouth about stealing the money, and didn't lie about who the beneficial owner was, how exactly is having his name as the beneficial owner of a property going to stop money laundering?

james1071 8y ago
The UK authorities have the power to ask people to explain where their money came from. So, if a former Russian public official is revealed to be the owner of a £10m property in London, he is at risk of having it confiscated.
- beaconstudios 8y ago
  I wonder if the funds will be rightfully returned to the Russian government in cases of embezzlement.
  - james1071 8y ago
    unexplained wealth - money goes to UK govt.