On London’s Billionaires Row in Hampstead, the seven-bedroom Carlton House with its 50-foot ballroom, underground swimming pool and 10-person Turkish bath is for sale for 14 million pounds ($21.5 million).
It’s being sold to repay BTA Bank after British courts seized assets from the Kazakh lender’s one-time chairman, billionaire Mukhtar Ablyazov. The lender accused him of embezzling about $6 billion from the bank, claims he says are false and politically motivated.
It took the U.K. High Court to establish that the home, with its marble bathrooms, crystal chandeliers and cherry-wood elevator, belongs to the 51-year-old, because the property was bought through a network of offshore companies that hid his identity. He argued it was his brother-in-law’s and he just rented it after his family moved to England in 2009.
Buying upscale homes in the U.K. through trust funds and overseas-based companies is popular among the rich as a way to minimize taxes and protect privacy. The practice also makes it difficult for law enforcement and the courts to establish whether their owners bought them legitimately. Hundreds of billions of pounds classified as the proceeds of crime are laundered here every year and London’s surging property market is one of the more attractive ways to do it, according to the U.K. National Crime Agency.
Real estate’s role in laundering money is “not one we understand well enough by any stretch of the imagination,” said Donald Toon, director of the NCA’s economic crime unit. “We’re not saying that money laundering is endemic in the property market, but we are saying it looks like there’s a problem here.”Luxury Tax
A new tax on luxury homes owned by corporations yielded 100 million pounds last year, almost five times more than expected, according to Her Majesty’s Revenue and Customs. As part of the levy, companies have to pay as much as 143,750 pounds a year to keep their owners’ names private if they own residential property worth more than 1 million pounds and don’t lease it.
Eighty percent of the tax revenue came from owners in Westminster and Kensington & Chelsea, London’s most expensive boroughs for housing. More than a quarter of the homes sold for more than 1 million pounds in prime central London in the year through June 2013 were bought by people who aren’t based in the U.K., according to Knight Frank LLP, a real estate broker.
The surprise windfall for HMRC prompted the NCA to start examining whether some of the houses were bought to launder money. The figures highlight both how attractive U.K. real estate is for wealthy investors globally, and why it’s vulnerable to crime.Good Investment
“A money launderer or somebody with significant illicit assets is attracted to a good investment in the same way as somebody who has legitimate assets is attracted to a good investment,” Toon said in an interview last month.
The U.K. government plans to publish its first national risk assessment of money laundering and terrorist financing this month, according to a Treasury spokesman. The report, which will include real estate, will look at the role of estate agents in fighting money laundering. Legislation is also being drawn up requiring the ultimate owner of U.K. companies to be listed on a registry.