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As The Global Rich Buy Up London Homes, Britons Ask If The Money Is Legit

A view of the luxury apartment in London belonging to Igor Shuvalov, Russia's first deputy prime minister. Many wealthy foreigners are buying property in London, leading some critics to demand greater transparency about the actual owners and the source of their wealth.
Rich Preston for NPR
A view of the luxury apartment in London belonging to Igor Shuvalov, Russia's first deputy prime minister. Many wealthy foreigners are buying property in London, leading some critics to demand greater transparency about the actual owners and the source of their wealth.

The lush Whitehall Gardens are just a five-minute walk from Britain's Parliament and 10 Downing Street, where the prime minister lives and works. Behind the gardens, with their grand fountains and flowers, sprawls an ornate stone building, overlooking the River Thames.

This is prime London real estate.

And it's where Igor Shuvalov, Russia's first deputy prime minister, has a three-bedroom penthouse that cost nearly $18 million dollars.

Shuvalov is one of many foreign politicians and business tycoons who have poured money into London real estate. Recent data show London has more multi-millionaires than any city in the world. The city's tallest residential skyscraper is almost two-thirds foreign-owned, with a quarter of units held through secretive offshore companies in tax havens.

"[London] is a relatively safe place to store money, ill-gotten or legitimate," says Andrew Foxall, who runs the Russia Studies Centre at The Henry Jackson Society, a London think tank. "A number of these individuals have allegedly been involved in money-laundering and tax evasion scandals."

Shuvalov has not been charged with any wrongdoing in Russia or in Britain. British and Russian government documents show the apartment is owned by a company Shuvalov runs with his wife.

U.S. and British publications have raised questions about the source of Shuvalov's wealth in recent years. He says he made his money as a businessman and denied there were any conflicts of interest with his government work.

"Regarding declaring my income and the income of my family, I have always approached the matter in an exceptionally responsible manner," he said in 2012. "As a lawyer, I have invariably followed the rules and principles concerning conflicts of interest. The funds that I earned as a businessman, which are now in a managed trust, form the basis of my independence from various interested parties, in making my decisions as an official."

But Foxall says it's suspicious that Shuvalov was able to afford an $18 million apartment on his civil servant's salary.

The annual British property tax on this 5,000-square-foot apartment is estimated to cost eight times Shuvalov's entire yearly pay, anti-corruption activists say.

Despite such questions, British landlords, realtors and tax authorities are all happy to take rich foreigners' cash, Foxall says, without really questioning where it comes from.

"For the very reason that the moment you went after one person, you would have to go after everybody. You'd have to launch inquiries, investigations," he says. "There are powerful vested interests that work against anything serious being done about this... No government would want to be responsible for such a negative impact on the London property market."

The result of all this foreign wealth?

London is very expensive. The average price of a home in London exceeds 600,000 British pounds — or about $875,000. Many young professionals have to commute from more affordable, faraway suburbs.

But in the city center, there are whole neighborhoods of multi-million-dollar homes that are largely empty. It's a phenomenon dubbed "Lights Out London." Absentee owners never turn on their lights, and never patronize local businesses. They're Arab sheikhs, Russian oligarchs, Nigerian and Chinese businessmen who might visit once a year, if that.

"There's nothing wrong with that if the money is demonstrably clean," says Roman Borisovich, a Russian banker turned anti-corruption activist. He founded a group called ClampK — the Campaign for Legislation Against Money-laundering in Properties by Kleptocrats. "What we don't want is to have proceeds of crime invested in London — as it happens right now."

Borisovich gave NPR a tour of luxury London properties bought by foreigners. We drove past a Mayfair row house linked to the sons of former Egyptian President Hosni Mubarak, and a stretch of buildings owned by Dmitry Firtash, a Ukrainian billionaire indicted in the U.S. for money-laundering. Among Firtash's holdings is a disused London Underground subway station, sold to him by none other than the British government.

Last summer, Borisovich collaborated on a documentary that aired on British TV, called "From Russia With Cash."

In the film, Borisovich went undercover, pretending to be a corrupt Russian official named Boris. He approached five separate realtors from well-known London brokerages, telling them he wanted to buy a multi-million dollar property. He made explicit that he would pay for it with money stolen from the Russian state.

All five realtors were willing to help him. Their commissions would have been in the six figures.

"They had all been trained to watch for money-laundering, but five out of five agreed to play along. That was the appalling part," Borisovich recalls. "Victorian bricks and mortar have become the currency of international crime," he says, adding that he believes the British establishment has been complicit.

At an Anti-Corruption Summit on May 12 in London, British Prime Minister David Cameron acknowledged as much. He said the U.K. bears some of the responsibility for global corruption.

"If money is being stolen in Nigeria, and hidden in London, or hidden in New York, there's an onus on us to act," Cameron said. "What we're talking about is stopping the corrupt hiding their loot from authorities."

So he unveiled new rules, some of which take effect next month, requiring foreign buyers and current owners of U.K. property to identify themselves and publish their assets. Britain and most of its overseas territories will also begin sharing a register of who owns which offshore companies.

The measures have been applauded by Borisovich and other anti-corruption activists. But the praise has not been universal.

"The very elite have been put off by these changes," says Trevor Abrahmsohn, a realtor who runs Glentree Estates, which deals in luxury property. "You have to be careful not to throw out the baby with the bathwater. There will be shady individuals who want confidentiality for illegal reasons, but a good deal of wealthy buyers want confidentiality for their own security and safety."

Abrahmsohn offers that. He says 70 to 80 percent of his deals involving properties with a sale price of more than $15 million have gone through offshore companies. But he says that rate is falling among his clients. The U.K. now charges higher tax on properties bought through offshore companies, rather than by real people.

He worries the super-rich could take their money elsewhere.

Copyright 2020 NPR. To see more, visit https://www.npr.org.

Lauren Frayer
Lauren Frayer covers India for NPR News. In June 2018, she opened a new NPR bureau in India's biggest city, its financial center, and the heart of Bollywood—Mumbai.