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Money laundering is most likely to wash with your local estate agent

Someone pointed out to me that when I wrote about the wealth divide, a lot of the property investing is not your average John or Jane, but a lot of money launderers. I wrote a while ago  that there is $1.6 trillion of money laundered worldwide every year, and only 2% is caught. That leaves an awful lot of money to spend on bricks and mortar.

As the Financial Times reported in 2016:

For three-quarters of Londoners under 35, owning a home in the capital remains out of reach. But according to the leaked Panama Papers, buying property in London presented little problem for associates of Bashar al-Assad, the Syrian president; for a convicted embezzler who is also the son of a former Egyptian president; or for a Nigerian senator facing corruption charges.

The leaks from the Panamanian law firm Mossack Fonseca have brought back into focus the ownership of London property via offshore companies by people suspected of corruption overseas — a phenomenon that has helped to shape the capital’s housing market, where prices are up 50 per cent since 2007.

In fact, it is likely that many of the empty homes in London, New York and Dubai are investments to shelve money away whilst it is whitewashed through the system, according to some. The way it works is that an offshore company buys a London property, and then just leaves it sitting there. It certainly rings bells for me, where I often think that 30 years ago the streets were packed with residents’ cars but today are empty as there are no residents.

Some would say it’s not surprising when 88% of estate agents and many banks don’t administer the rules or understand them. Research by anti-money laundering specialists Fortytwo Data shows nearly four in 10 (37%) of all suspicious activity reports (SARs) across the entire legal sector relate to either residential or commercial conveyancing. Even the President of the United States himself, yes the Trump, is being investigated for using property investments to launder money. In other words, it’s common practice.

I find it funny that people always talk about bitcoin being used for money laundering when it is far more difficult to launder money through a network than through a property transaction. Theresa May speaking at Davos,said:

“Cryptocurrencies like Bitcoin, we should be looking at these very seriously, precisely because of the way that they can be used, particularly by criminals.”

Donald Trump’s Treasury Secretary gave his first comments on bitcoin back in November, saying:

“The first issue is to make sure people can’t use bitcoin for illicit activities. So we want to make sure that you don’t have the dark web funded in bitcoins and that’s something that is a concern of ours today.”

And more often than not, when I talk to bankers and others in the establishment, they immediately associate bitcoin and cryptocurrencies with crime. Bitcoin bad, blockchain good.

Yet, for all this talk, the truth is that cryptocurrencies aren’t a great mechanism for laundering as most transactions can be tracked and traced, unless you use something like Monero. The Foundation for Defense of Democracies’ Center of Sanctions and Illicit Finance in conjunction with blockchain analytics company, Elliptic, has published a study seeking to track the circulations of illicit funds within the bitcoin economy from 2013 to 2016. The research concludes that the share of funds of illicit origin comprises less than one percent of all bitcoin flows, and has exponentially declined as the cryptocurrency has gained increasing adoption and popularity.

The report states that “Criminals – often early adopters of new technologies – quickly appreciated that bitcoin has unique properties that could potentially serve their interest in evading law enforcement.” The research asserts that “bitcoin’s illicit use is mainly based on anecdotal evidence, usually without supporting data analysis of how it is used across geographical regions, or trends over time.” Although the report concedes that “it is impossible to quantify exactly how much bitcoin is used illicitly,”

The report also notes that nearly all the illicit activity took place on the Silk Road or Alpha Bay darknet websites that have both now been shut down:

In other words, the $1.6 trillion of money being laundered every year by criminals is far more likely to wash its way through your local estate agent than the cryptocurrency network. Just saying.

 

 

 

About Chris M Skinner

Chris M Skinner
Chris Skinner is best known as an independent commentator on the financial markets through his blog, TheFinanser.com, as author of the bestselling book Digital Bank, and Chair of the European networking forum the Financial Services Club. He has been voted one of the most influential people in banking by The Financial Brand (as well as one of the best blogs), a FinTech Titan (Next Bank), one of the Fintech Leaders you need to follow (City AM, Deluxe and Jax Finance), as well as one of the Top 40 most influential people in financial technology by the Wall Street Journal’s Financial News. To learn more click here...

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