Real estate and the promise of ready money – who cares if the cash is dirty?

The UK welcomes wealthy foreign investors, but does it really care where their money comes from? Estate agents in London’s super expensive neighbourhoods are apparently agreeing to house purchases with ‘corrupt’ Russian politicians.FCA London Property

If you are in the UK, tune in to Channel 4 this evening to watch a revealing documentary about what really goes on between agents and super rich buyers. In ‘From Russia with Cash‘,  undercover reporters pose as an ‘unscrupulous’ Russian government official “Boris’ who wants to buy a house in London for his mistress, ‘Nastya’. Despite ‘Boris’ making is clear to the agents that his funds are not from a legitimate source, the estate agents he deals with are apparently happy to go ahead with the sale and even recommend ways for ‘Boris’ to keep a low profile, according to the Guardian report.

Channel 4’s reporters used hidden cameras to film meetings with estate agents, who talked openly about previous dealings with foreign clients, government ministers – politically exposed persons, and the amount of deals which are made with some degree of anonymity. Politically exposed persons (PEPS) are individuals with access to national coffers, funds which belong to the electorate. They are government officials, their families, their associates and beyond.

Property, or real estate, is widely recognised as the best way to invest. So it should be no surprise that the proceeds of crime have found a natural home in bricks and mortar. Rules on investing and moving dirty cash are well publicised. In the UK and many other countries, Financial institutions, lawyers, accountants, dealers in high value goods and real estate agents are required to report transactions of dubious origin – those which could be hiding the proceeds of crime – to law enforcement. The penalties for not reporting suspicious transactions are severe for the institution and the individual.

Corruption and billionaires  

FCA - TITransparency International’s ‘Unmask the Corrupt‘ campaign looks closely at how UK property launders funds for corrupt individuals, many of whom are politically exposed persons. Funds designated for schools and hospitals – ‘Boris’ claims his money comes from a government health budget – is sent to offshore havens, shrouded in secrecy and then passed on to ‘enablers’ or gatekeepers in the UK who advise and facilitate investment. The thing is, the practice is nothing new. This is how the big money has always moved – the only difference is that now it is under scrutiny.

Forbes, the register of all things super-rich, lists London as third in the world of ‘Billionaire Cities‘.  Five of the remaining nine are Asian cities – Hong Kong, Tokyo, Shanghai, Singapore and Mumbai sit alongside Paris, Moscow, New York and Sydney. If the corrupt are managing to get money into the UK property market, they are certainly managing it in the other countries on this list.

Will the estate agencies and law firms mentioned in this programme be investigated and will this give rise to increased scrutiny of the real estate sector in the UK? Financial Crime Asia is keen to find out.


A mansion fit for a PEP

FCA mansion-on-the-heath-3-small

Who lives in a house like this? The dining room at Kenwood Gate

The brilliant Organised Crime and Corruption Reporting Project has published a ‘through the keyhole’ report into the USD25m home owned by the family of Ilham Aliyev, the President of Azerbaijan and the former vice-president of the Azerbaijan’s State Owned Oil Company (SOCAR).

Delving into ownership registers, the OCCRP has unearthed that the house is in fact owned by an Isle of Man registered company called Beckforth Services Limited.

Beckforth Services Limited is owned by President Aliyev, his wife Mehriban and their daughter Leyla Aliyeva. Leyla is registered as owning all of the shares in Beckforth. All three list their address in Baku as 73 Neftchilar Avenue, Baku which is also the SOCAR registered office in the capital. Neft means oil, Neftchilar apparently means Oil Workers.

Aliyev reportedly earns a salary of around USD230,000 per annum. As an elected official, neither he nor his wife can run businesses, which seems fair enough. The report doesn’t mention whether they can own property or not.

The house on Hampstead Heath was acquired in 1998. This was seven years after the fall of the Soviet Union, which had governed Azerbaijan from Moscow for the previous seventy years. At the time President Aliyev was the VP at SOCAR; Azerbaijan’s oil and gas sector. This year, Aliyev spoke at the Caspian Oil and Gas Exhibition. The President’s ties to the sector are still strong – unsurprisingly as this has been responsible for the country’s high economic growth, according to the CIA World Factbook.

Watch this video for the full picture.

Readers could be forgiven for thinking that the high economic growth and booming Azeri prosperity symbolised by the emblematic Flame Towers, and the clutch of extremely high value goods outlets opened in Baku has been spread across the country.

FCA Italian ShoesThis  2012 report from the New York Times offers an insight into Baku’s luxury goods market, with Italian high-end designer goods topping the scale.  It makes an interesting observation which sheds light on how different countries record trade levels. ‘Between 2003 and 2009, Italy recorded exports to Azerbaijan of roughly $1.6bn ; during the same period, Azerbaijan recorded imports from Italy of $857m.’ If the figures are correct, some USD143m in imports went astray. That’s a lot of hand-stitched shoes.


Myanmar PEP bribery probe targets property investment

Property is, without doubt, one of the preferred tools for laundering the proceeds of crime. Where better to hide the bribe money given by the fixer of a foreign arms company, or the hoards of cash made selling off a state enterprise or historical artefact you did not pay tax on than in the construction of a brand new 14 storey condominium slap bang in the heart of a developing capital city?



Myanmar‘s capital Yangon is undergoing a property boom, and the Financial Intelligence Unit, part of the Ministry of Home Affairs, is working to identify and stem the flow of dirty money into the real estate sector.

Legally, property companies are not required by law to report suspicious transactions to the FIU, however the government is encouraging them to report any transaction worth more than K100m (Kyat) (USD102,000) for investigation. New money laundering regulations scheduled to pass in the Burmese parliament in October will make suspicious transaction reporting mandatory for more business sectors.

Chinese money

The move comes hot on the heels of a report in the China Securities Journal, claiming that K31.7tr (USD32.5bn) in illegal foreign currency investment was flowing into Myanmar from China annually.

The great Thai land grab under a dusty magnifying glass

Location map of Thailand Equirectangular proje...

Location map of Thailand Equirectangular projection, N/S stretching 103 %. Geographic limits of the map: N: 20.6° N S: 5.4° N W: 97.1° E E: 106.0° E (Photo credit: Wikipedia)

The Thai government is investigating the illegal acquisition and sale of some 12,000 rai of land across the Kingdom, from Chiang Mai in the north to the southern provinces, according to the regional press. One rai is the equivalent of 1,600m squared, so the total land under investigation is 19.2km2. More than one third of that land is on Phuket itself, Of the island’s 224km2,  3,600 rai or 5.76kmis under scrutiny.

The Phuket News, the island’s English language news rag has published the story. Browse through any newspaper or magazine in Thailand and you will find dozens of advertisements for real estate firms in English, Russian, Swedish and Thai. One of the first things I noticed when I turned up in south Thailand with a bag was the amount of money flying around the tourist spots, who were way removed from the traveller crowd. Much energy is spent trying to channel that money into property and land. Why spend two weeks in paradise when you can make it your home?

I have spent a little time in Thailand, exclusively in the south on paradise-like islands. A swathe of one island is a designated national park, where the lush green flora of the tropics can flourish. Visitors pay a nominal fee to walk through the park’s trails and camp on the unspoiled white sand beach. A walk right through the park leads to a secluded, bizarrely situated and eccentrically designed resort, boasting different types of accommodation including rooms in boats, half finished air conditioned apartments and tree houses. There is a small pool surrounded by plaster of paris giraffes and elephants and fake street lights. The resort is an eclectic projection of the owners’ tastes which sadly do not appeal to many tourists, aside from me perhaps. When I first stayed there, I lived in a tree house and one of the boat houses. I organised parties, promoted the resort online and took tourists on bike rides across the island to visit the place. In all, I bought in.

The owners with the strange taste in decor were a charming old Thai couple. A former state governor and a former high court judge – politically exposed persons who held influential positions and at least in the case of the ex-governor, had access to public funds. They spent their retirement between this property and the others they owned, including rubber and fruit plantations. a birds’ nest farm and homes in southern Thailand. The ex-governor and I once drove in his clapped out old Mercedes to a city on the mainland. He proudly showed me his identity badge, which showed his former minister status, and mentioned this would mean he paid no fee at toll booths and never had to bribe traffic cops.

“And if that doesn’t work,” he laughed slapping the side of his seat, “there’s always this.” He pointed to an ivory handled pistol which looked as old as the car shoved between the driver’s seat and and the gear stick.

Somewhere between Chiang Mai and the border wi...

Somewhere between Chiang Mai and the border with Myanmar. (Photo credit: Wikipedia)


I have no idea whether the land this man had acquired was actually a part of the national park. When I asked to see plans of the resort’s plot, none were produced. Many people on the island claim he took what he wanted from the national park to build the resort.  While I was there, at least three tourists made him offers for the land, which he declined. The man tells a romantic story of finding the land one day while exploring the jungle on the island. He staked his claim unimpeded and the local people from nearby villages brought him fish to eat while he stayed there. This bucolic image of an old man sat at the edge of a beach surrounded by tall trees and screeching monkeys and barefoot locals climbing over rocks to deliver him food is almost certainly embellished. The man’s children and employees recite the tale with ease, even the part about him using his influence to acquire identity cards for unregistered citizens. This, in fact, is what the King of Thailand did for many indigenous communities to stop them from growing heroin in the Golden Triangle. I even heard myself telling these stories in the combined voice of wisdom and naivety. Certainly, everyone was made to understand that this man, with an enormous piece of land in a protected part of the national park, an ex-governor whose wife was a high court judge, was well beloved and respected throughout. The locals, I was told once, called him ‘Phuwaa’, a term I had to research, which means ‘speaker’ and is given to the village chief.

I don’t know if this man and his wife are still alive, or where they are. Their children are running the resort as their inheritance and the deeds will no doubt be passed down to their children after them until the real title of the land is lost. I have not named the island, resort or family in question, although it would not be difficult to find out where it is. I do believe that this story is not unusual in Thailand and the sense of entitelement felt by the certain groups has filtered down to the rest of society.

The influx of organised criminals from abroad who have chosen to invest their dubiously acquired wealth in Thailand has not been accidental. Apart from the country’s stunning natural beauty, there are other appeals to someone who wants to invest without questions. Corruption in local public officials and the ability to turn a blind eye for the right price are common place and lauded by criminals. I do wonder, though, if the land I know of is under investigation, and if the probe takes any real momentum, will the losers be the foreigners who tried to cash in on cheap deals in paradise, or the national buyers.

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