We are a corporate intelligence and financial crime advisory firm based in the City of London. We specialise in: conducting enhanced due diligence on high risk customers and third parties; integrity due diligence on critical acquisitions and investments; market entry and political risk analysis; and investigations. We provide tailored training and advisory services relating to financial crime, in particular anti-money laundering and sanctions compliance. Our clients include some of the world’s leading regulated financial institutions and corporations. Our team has decades of collective experience in advising clients on financial crime and intelligence gathering, helping them to manage risk and maximise potential. Contact us today for further information on how we can help you.

1. FINANCIAL CRIME IN THE REAL ESTATE SECTOR
April 2016
COUNTERING ILLICIT MONEY FLOWS

2. ILLICIT MONEY IN REAL ESTATE: Facts and Figures
2 FINANCIAL CRIME IN THE REAL ESTATE SECTOR – COUNTERING ILLICIT MONEY FLOWS
• London has recently been dubbed the ‘world
capital of money laundering’ in the press.
• Billions of pounds of corrupt funds have been
laundered by criminals and foreign officials buying
upmarket London properties through anonymous
offshore companies.
• 75% of properties owned by subjects of corruption
investigations were held through offshore shell
companies, according to the Metropolitan Police.
• In 2013, the Financial Services Authority estimated
that between GBP 23-57 billion was laundered through
the UK, corresponding to 1.4-3.6% of the national GDP
that year.
In 2014, the regulator fined three UK estate
agents for deficiencies in their anti-money
laundering programmes:
Jackson Gurundy: GBP 170,000
Hastings International: GBP 48,000
Jeffrey Ross: GBP 29,000

3. ILLICIT MONEY IN REAL ESTATE: Facts and Figures (cont.)
3 FINANCIAL CRIME IN THE REAL ESTATE SECTOR – COUNTERING ILLICIT MONEY FLOWS
• Transparency International - a highly respected NGO
focused on anti-corruption - notes that the sources of
foreign investment for the highest value properties in
the UK tend to be from regions of the world with
substantial domestic public sector corruption
problems, namely: Eastern Europe, Central Asia and
MENA. This correlates with a 2013 study by Savills,
which found that 90% of new build luxury properties
were purchased by overseas buyers, primarily from
Eastern Europe, Russia, MENA and China.
• Out of the 144 properties involved in Proceeds of
Crime Unit investigations in 2015, only 31 were
registered to individuals, though primarily to close
associates of the corruption suspect.

4. FINANCIAL CRIME IN THE REAL ESTATE SECTOR – COUNTERING ILLICIT MONEY FLOWS
MONEY LAUNDERING THROUGH REAL ESTATE: How and Why?
4
• Money laundering is the process by which criminals
conceal the illegal origin of the resulting property
or income.
• To distance themselves from their crimes when
purchasing property, corrupt individuals use complex
and opaque corporate structures and legal
arrangements, often spanning multiple jurisdictions
and “secrecy havens”.
• These structures deliberately obscure the identity
of those who own the companies.
• Exploiting the often credible reputation of
intermediaries - such as estate agents and property
lawyers, criminals can more easily pass initial
eligibility checks.
Two notable cases of London properties purchased
with corrupt funds were those of Saadi Gadaffi
from Libya, and James Ibori of Nigeria.

5. FINANCIAL CRIME IN THE REAL ESTATE SECTOR – COUNTERING ILLICIT MONEY FLOWS
MONEY LAUNDERING THROUGH REAL ESTATE: How and Why? (cont.)
5
• Intermediaries allow criminals to gain access to legitimate
institutions and carry out transactions, while ‘keeping
sufficient distance’ from the true source of funds.
• Luxury UK properties provide a safe investment for
criminals with very low risk of capital loss; as well
as a source of legitimate earnings, through equity
or rental income.
• Criminals may be drawn to the property market
as a channel to launder illicit funds due to the:
o Ability to buy real estate using cash and
disguise ultimate beneficial ownership.
o Ability to launder significant amount of
funds in a single transaction.
o Ability to generate legitimate funds
through equity or rental income.
o Stable market and relatively low
risk of capital loss.
o Air of respectability it affords.

6. FINANCIAL CRIME IN THE REAL ESTATE SECTOR – COUNTERING ILLICIT MONEY FLOWS
IN THE PRESS: Recent Negative Publicity
6
Date Publication Content
March 2016 The Guardian: “Kleptocracy Tours Expose State
Failures to Stop Dirty Money Buying Up London”
The article by Roman Borisovich (former Vice President of Russia’s largest insurance company
turned anti-corruption activist) is part of his effort to bring public awareness to alleged corrupt
Russian, Ukrainian and Kazakh officials and oligarchs’ multi-million pound property purchases.
October 2015 Transparency International: “Corruption on Your
Doorstep: How Corrupt Capital is Used to Buy
Property in the UK”.
Transparency International’s in-depth analysis concludes that significant regulatory changes
need to be made to ensure that estate agents and other intermediaries assist in preventing
corrupt officials from exploiting the UK property market to launder their ill-gotten funds.
July 2015 BBC 4: “From Russia with Cash” The documentary centres on undercover reporters posing as corrupt Russian government
officials attempting to purchase a property in London with dirty money. The reporters targeted
five London estate agents in upscale neighbourhoods and concluded that the estate agents
were indifferent to the source of funds, despite repeatedly being informed of its illicit origins.
March 2015 Oliver Harvey and Robin Winkler, Deutsche Bank
foreign exchange specialists: “Dark Matter: The
Hidden Capital Flows that Drive G10 Exchange Rates”
Deutsche Bank’s special report concluded that the UK has seen GBP1 billion a month in
unrecorded capital inflows, primarily from Russia, with much of it channelled to the London
property market. The analysts assert that a substantial amount of this money is illicit, and has
had a direct correlation on the property price chain in the city.
February 2015 –
January 2016
New York Times: “Towers of Secrecy” Over a year, the NYT investigated and unpacked shell companies which own some of New
York’s and Los Angeles’ most expensive properties. The exposé revealed ownership of at least
16 properties with ties to suspect funds, including from Russian, Chinese and Malaysian
politically-exposed individuals whose official salaries were not commensurate with the price of
the properties purchased. Some of these individuals have been accused - officially and/or in the
press - of corruption and other crimes.
The real estate industry’s connection to corrupt funds has frequently featured in the press over the past year, primarily exposing
weaknesses which have enabled corrupt officials to purchase luxury properties in London and New York. Here are a few examples:

7. 7 FINANCIAL CRIME IN THE REAL ESTATE SECTOR – COUNTERING ILLICIT MONEY FLOWS
Corruption is a major contributor to global poverty.
Money expropriated by corrupt government officials
considerably reduces government resources meant to
provide social services, investments in infrastructure and
economic development ,which would ultimately help
their citizens lift themselves out of extreme poverty,
and assist in their countries’ prosperity.
One of the most important controls over the
prevention and detection of money laundering is to
have staff alert and trained to identify potentially
suspicious activities. Competent staff can safeguard a
firm from enforcement actions, costly fines and
remediation.
Fines and enforcement actions are inevitably
accompanied by a media frenzy of negative press
concerning the target firm, which erodes customer
confidence in their brand - and can reasonably
impact its bottom line.
BROADER IMPLICATIONS: Negative Effects

8. REGULATIONS: Future Landscape
8 FINANCIAL CRIME IN THE REAL ESTATE SECTOR – COUNTERING ILLICIT MONEY FLOWS
• In its publication “Corruption on Your Doorstep”,
Transparency International (TI) notes strategic
recommendations to prevent the UK property market from
being exploited by criminals. Specifically, TI suggests:
o Mandating that ultimate beneficial ownership
information, including natural persons behind legal
structures as well as property valuation, be
registered with the Land Registry. This information
should in turn be publicly available.
o Requiring estate agents to perform due diligence on
purchasers in addition to sellers.
o Introducing a limit on cash payments when
purchasing a property, and requiring that remaining
funds come from a bank account.
o For HMRC to consistently enforce estate agents’
regulatory compliance through the use of monetary
penalties and incarcerations.
o Requiring more relevant anti-money laundering
training for estate agents.
UK anti-money laundering efforts have, over time, become
more aligned with those in the US. As a result, FinCEN’s
temporary measure, stronger transparency requirements
included in the EU’s 4th Anti-Money Laundering Directive,
and the UK’s upcoming Global Anti-corruption Summit could
signify an impending change in UK estate agents’ AML
standards. Moreover, a consultation paper on “Beneficial
Ownership Transparency” by the Department for Business
Innovation & Skills echoes some of TI’s recommendations.

9. REGULATIONS: Future Landscape (cont.)
9 FINANCIAL CRIME IN THE REAL ESTATE SECTOR – COUNTERING ILLICIT MONEY FLOWS
• On the back of the New York Times’ series “Towers of
Secrecy”, the Financial Crimes Enforcement Network
(FinCEN, a division of the US Treasury) announced a
temporary measure to identify and deter money
laundering through real estate. From 1 March 2016 until
31 August 2016, title insurance companies are required
to report the identities of cash purchasers of certain
luxury properties in Manhattan and Miami.
• The US real estate industry has repeatedly been granted
exemption from AML requirements prescribed in the USA
Patriot Act. FinCEN’s temporary measure could signal a
more permanent regulatory change in the future.

10. ABOUT APERIO INTELLIGENCE
We are a corporate intelligence and financial crime advisory firm
based in the City of London.
We specialise in conducting enhanced due diligence on high risk
customers and third parties, integrity due diligence on critical
acquisitions and investments, market entry and political risk
analysis, and investigations.
We provide tailored training and advisory services relating to
financial crime, in particular anti-money laundering and sanctions
compliance.
Our clients include some of the world’s leading regulated
financial institutions.
Our team has decades of collective experience in advising clients
on financial crime and intelligence gathering, helping them to
manage risk and maximise potential.
Aperio Intelligence Limited
125 Old Broad Street
London EC2N 1AR
t: +44 (0)20 7073 0430
e: info@aperio-intelligence.com
www.aperio-intelligence.com
Registered Address: Carlton House, 101 New London Road, Chelmsford, Essex CM2 0PP. Registered in England & Wales: 09164101 VAT: GB 195 2320 10
© Aperio Intelligence Limited 2016. All rights reserved. Aperio Intelligence and the Aperio logo are registered trademarks of Aperio Intelligence Limited.
For further information, please contact:
Ana Perez-Sepulveda
Head of Financial Crime Training
+44 (0)20 7073 0438
ana.perez-sepulveda@aperio-intelligence.com
Greg Brown
Senior Client Partner
+44 (0)20 7073 0433
greg.brown@aperio-intelligence.com