Managing Partner of Martin Kenney & Co., Solicitors
The New York Times recently published an article describing a forthcoming clampdown by the U.S. Treasury Department on "secret buyers" snapping up high-end real estate.
As recently as July last year, the U.K. TV company Channel 4 conducted an undercover investigation into precisely this problem in London, generated by the suspicion that secret buyers, predominantly Russian and Chinese, were using London property portfolios as a money laundering methodology.
The undercover sting, which The Guardian newspaper covered in some detail, clearly portrayed the scale and depth of the problem facing both the U.S. and U.K. The documentary revealed a London estate agent effectively being told that a Russian 'buyer' had obtained his money via corruption, linked to Russian pharmaceutical contracts, and as a result his payment would have to be in cash. Unfazed, the estate agent confirmed that hiding the client's identity would not be a problem; furthermore, he had access to a law firm that would facilitate the deal.
These sorts of transactions have been going on for some time: the only surprise is that it has taken so long for the authorities to act on them. Other than some concerns over the regulators’ over-emphasizing the time scales and geographic regions that would initially be targeted, I applaud this as a first step towards greater scrutiny and additional transparency. As a lawyer specializing in cross-border asset recovery and the representation of victims of global economic crime, it seems mind boggling that complicit professional enablers are still willing to run the risk of incarceration at a time when due diligence is at the forefront of any reputable organization’s business model.
The mechanics of constructing hidden ownership via shell companies is not the issue. How the money laundering takes place and the methodologies used is immaterial, too. The biggest takeaway of this problem is the need for regulators to continue upping their game in response to the few bad apples who continue to bring professions into disrepute. Once this investigation takes shape, the common threads linking webs of deceit will flag complicit professionals. It is imperative that they are brought to book: only then will the message get through to deter those tempted by these shady deals.
Martin Kenney is Managing Partner of Martin Kenney & Co., Solicitors of the British Virgin Islands, a specialist investigative and asset recovery practice focused on multi-jurisdictional fraud cases. MartinKenney.com | @MKSolicitors