Is Croydon’s property boom cleaning up dirty money?

By - Tuesday 11th August, 2015

As Cameron cracks down on money-laundering, Sean Creighton gives praise where it’s due, but questions remain

Prime Minister David Cameron is to be congratulated on his announcement that action is to be taken to try to prevent money laundering by off-shore companies investing in property in Britain. This praise may surprise readers who consider me just to be an unreconstructed leftie. But let us give credit where it’s due – as also to Home Secretary Theresa May’s rejection of water cannon for London and the inquiry into deaths in custody.

We know that many of the new apartment blocks being built in Croydon and elsewhere in London are being marketed abroad. Croydon Council should welcome the Prime Minister’s initiative. It should also support it by negotiating with developers, through the Develop Croydon consortium, to reach an agreement that it will not market new Croydon apartments abroad, and will refuse to sell to any overseas registered company that approaches it to purchase such apartments, unless that company can prove its money is not from criminal sources. 

I began to investigate money-laundering in November 2013, when I emailed the Consumer Queries Unit at the Financial Conduct Authority with the following questions.

  • What steps does a seller or their agent have to take to ensure that money is legitimate and that they can provide proof of this to the FCA?
  • What steps do recipients of proposed investments have to take to ensure that the money is legitimate and to provide that proof to the FCA?
  • Where sales of apartments are concluded overseas, do the sellers and their agents have to provide proof to the FCA that the money is legitimate?
  • If there is no requirement to get approval from the FCA, what inspection checks does the FCA make to satisfy itself that such investment money is legitimate?

I received a reply assuring me that ‘our rules require that regulated firms undertake sufficient effort to combat fraud and prevent money laundering [but that] we do not issue rules or guidance on how to comply with money laundering regulations’. The reply continues: ‘[The onus is thus] placed on senior management of firms to ensure that [regulations] are complied with… You may wish to visit the Joint Money Laundering Steering Group (JMLSG’s) website for further information about the specific guidance that firms follow when considering their anti-money laundering policies’.

Unless I misread that reply, no checks exist to ensure foreign money is above board

I therefore contacted the JMLSG Helpdesk at the British Bankers’ Association and received the following response: ‘If your concern is of general interest in light of the extent of overseas investment, there is nothing I can add to the FCA response. If… you have a specific question, I might be able to offer a comment on how the guidance affects things’.

On the basis of these replies I wrote to Margaret Hodge, the then Chair of the House of Commons Public Accounts Committee, asking whether the committee would look at the issue. I suggested to her that unless I had misread the reply from the FCA, no checks seemed to be undertaken as to proof that foreign investment is above board. Therefore it seems possible that such investment could include monies effectively being laundered into the British economy.

Public Accounts Committee staff advised me that the issue fell within the remit of the Treasury Committee, and told me that they would draw my letter to Hodge to the committee’s attention. I have since been told by the committee’s staff that it has not inquired into the subject of money since.

Sean Creighton

Sean Creighton

A former employee of and freelance project worker with community and voluntary organisations, Sean is active with Croydon Assembly and with the Planning and Transport Committee of the Love Norbury group of residents associations. He is Chair of the Norbury Community Land Trust. He is a historian of Croydon and South-West London, British black society, social action and the labour movement. He coordinates the Samuel Coleridge-Taylor and Croydon Radical History networks. He runs blog sites covering Croydon, Norbury and history events, issues and news. He runs a small scale publishing imprint called History & Social Action Publications. He gives talks on a range of history topics and leads history walks.

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  • moguloilman

    Hello Sean,
    I don’t see money laundering, water cannon or deaths in custody as right/left issues.

    Regarding ‘dirty money’ being laundered through property transactions, the question is only of how we might prevent it. The practicality of somehow proving that the money used to buy a house is ‘clean’ is what is difficult.

    From your correspondence with the authorities it would seem that they rely on holding regulated firms to account. Success here requires effective policing and sanction, very difficult when it comes to foreign jurisdictions, but difficult doesn’t mean we should not address it.


  • Sean Creighton

    The House of Commons Home Affairs Committee ‘Proceeds of Crime’ report published last month expresses concern about the extent of laundering through property. It states: ‘At the moment it is far too easy for someone intent on laundering money to buy a property with their ill-gotten gains, and rent it out in a very buoyant and robust letting market, and take in clean money in perpetuity. We recommend that, as with estate agents and other professional services, letting agents must use the Suspicious Activity Reporting regime (SARS) system and undertake appropriate due diligence when taking on new clients.’ Croydon Council and Police should discuss with developers that they are ensuring tight complicance with requirements to ensure no sales of apartments are made to those who are money laundering.