Westminster Council Launches New Initiative to Clamp Down on Properties with Unclear Ownership Structures

In a charter released by Westminster City Council on April 6, 2023, a new initiative has been launched to tackle London’s international reputation as a haven for money laundering. Supported by the New West End Company (NWEC), the Heart of London Business Alliance (HOLBA), and the Fair Tax Foundation, the charter outlines several action points for participants to improve transparency and accountability and support fair taxation.  

The initiative follows the council’s announcement in September 2022, which highlighted the beginning of the local authority’s dirty money campaign. According to Adam Hug, leader of Westminster Council, “It took the war in Ukraine to refocus attention on oligarch investments and what London has become in terms of a European laundromat for dirty money.”

In the press release, it was noted that Westminster had seen a 1,200 percent rise in the number of properties registered to owners in Russia since 2010. 

Westminster Against Money Laundering Charter

In 2022, Transparency International reported that £1.5bn of UK property – mainly in London – was bought by Russians who had been sanctioned and/or accused of corruption. Nearly 30 percent of these properties – the highest percentage – were in the City of Westminster. The nonprofit also found that over 2000 companies registered in the UK and its overseas territories were involved in 48 Russian money laundering and corruption cases. 

To illuminate illegal practices that obfuscate the real overseas owners of properties and businesses, the Westminster Against Dirty Money Charter outlines the following commitments:

• Develop a list of properties where the ultimate beneficial owner (UBO) is unclear or appears inconsistent with other records. These properties will then be mapped across London and shared with relevant enforcement bodies. 
• Be upfront about all beneficial ownership structures by understanding who tenants and leaseholders are and encouraging them to be as transparent as possible.
• Continue to disrupt businesses with a track record of selling unsafe goods and other practices commonly associated with suspicious financial activity. 
• Continue to invest in encouraging positive growth in Westminster.
• Collaborating with other governmental bodies to promote reform of the business rates system to ensure that high streets across London remain vibrant and competitive.

Candy Stores in London’s West End

Highlighted as a case study in the charter, American-style sweet and souvenir shops have been subject to ongoing scrutiny over the past several years due to suspected money laundering activity and unpaid business rates. On Oxford Street alone, there are currently 29 US candy stores, most of which owe Westminster City Council a collective £9m in outstanding business rates. 

A typical behavior seen in these types of businesses is described in the charter as ‘phoenixing’ – where the company dissolves as soon as the council tries to take action to recover arrears. Since the company owner is often listed as a shell company, the council has no assets to pursue. 

Through a combination of enforcement and court action, the local authority said it “has led the national charge” on tackling these types of enterprises that commonly use opaque shell company structures to obscure beneficial ownership. Since the beginning of 2023, the council has recovered £250,000 in unpaid business rates and confirmed the impounding of over £1m in unsafe or illegal goods from the stores due to multiple raids.

Key Takeaways

Westminster Council’s new charter highlights the importance of implementing a robust corporate onboarding and screening solution to map out company ownership and control and uncover hidden threats. Since the know your business (KYB) process requires firms to collect, analyze, and manage vast amounts of data on the businesses they have relationships with, compliance teams should consider implementing an automated KYB solution to reduce time and labor costs. This may involve integrating smart technology tools into an existing anti-money laundering (AML) infrastructure to perform the necessary checks and processes faster and more efficiently than a human compliance employee ever could.