The UK has long had an interest in tackling illicit finance – because we are at the epicentre of the problem
Joe Powell is the MP for Kensington and Bayswater. This essay is from the collection “Rethinking the UK’s role in a fractured world”, written by a cross-party group of MPs for the New Economics Foundation.
Tackling illicit finance and corruption should be one of the great progressive causes of our time. Advanced and developing economies alike face a looming debt crisis and reduced fiscal space; the Sustainable Development Goals have an estimated funding shortfall of $4tn a year; and investment is needed in the energy transition. Yet it remains far too easy for autocrats and criminals to launder money that should be part of the solution. Rather than contributing to the tax base to invest in public services and stable economies for the future, dirty money fuels the drugs trade and other serious organised crime, exacerbates the housing crisis through its accumulation of property, and helps fund conflict from Russia’s illegal invasion of Ukraine to devastating violence in Sudan.
The UK’s central role
The UK has long had an interest in this problem because we are at the epicentre. New research from the Finance Innovation Lab estimates £325bn in dirty money flows through the UK each year, a figure which more than doubles when you include overseas territories like the British Virgin Islands and crown dependencies. These sums of money suggest an intractably large problem, but there are concrete steps that should be taken to restrict these financial flows and mitigate the harms they are causing.
The Labour government has recognised the opportunity to build an international coalition focused on dirty money. It will host an illicit finance summit in late 2026 as part of a build-up to the G20 presidency. This is also when the UK has the presidency of the Financial Action Task Force and the Open Government Partnership, meaning there is a unique opportunity for global leadership.
Deputy prime minister David Lammy launched a campaign against kleptocracy in 2024 that has seen expanded anti-corruption and human rights sanctions, but the multilateral context is challenging. Tackling dirty money will always challenge vested interests at home and abroad. Bold action is needed.
An ambitious agenda would focus on three areas: anonymous-owned properties; tax-haven secrecy; and the professional enablers who turn a blind eye to dirty money or silence journalists attempting to uncover corruption.
End housing dirty money
Property is a good place to start. Major cities in many G20 countries are grappling with a common challenge. In my constituency of Kensington & Bayswater in London, 40% of the foreign-owned property is held in anonymous trusts: approximately 4,000 properties with hidden ownership, despite the introduction, after the invasion of Ukraine, of a register of overseas-owned properties. This major loophole incentivises more opaque ownership structures, which are only thrown open through leaks and investigations like the Panama and Paradise Papers. The tax lawyer Dan Neidle recently found that the ultimate owners of 45,000 properties worth an estimated £190bn are still hidden from public view. I want London to remain open to investment, but at a bare minimum we should have full transparency over who owns what.
Baroness Margaret Hodge is currently leading a review of asset ownership in Britain, which is looking at property, alongside other high-risk sectors. That review could report in the coming months, and give a springboard to a UK-led international campaign to ensure that every property, no matter where it is, has a record of the ultimate owner. This would serve as a major disincentive to use London property as a safe-deposit box for dirty money. This would, in turn, remove a distortion in the housing market that has helped price out Londoners.
Action on tax havens and shell companies
Alongside removing secrecy around property ownership should be a reinvigorated push for company ownership transparency globally. Shell companies have been likened to getaway cars for corrupt funds, with layers of anonymity making it harder to trace the actual owners and preventing law enforcement from following the money. The rise of cryptocurrency is making this work even harder.
The UK again has an outsized role in addressing this global problem. In 2016, we became the first major economy to commit to a fully transparent register of beneficial company ownership. Today, 104 jurisdictions have a live register (with varying degrees of openness), which allows tax authorities, investigators, and journalists to follow the money by understanding the true owners of companies who were previously anonymous. This is a little-known British success story in establishing a new global norm to fight economic crime, with the glaring exception of overseas territories and crown dependencies.
Gibraltar has implemented open registers with no economic downside, showing it can be done, but almost every other territory has missed deadline after deadline to make progress, with the British Virgin Islands the worst offender. Transparency International UK found that over 90% of companies involved in corruption and money-laundering cases related to the overseas territories were incorporated in the British Virgin Islands, appearing in cases amounting to £250bn across 79 countries. Most Overseas Territories have yet to set up a functioning register of the ownership of companies registered there. This is not an abstract problem; it is causing real harm all over the world and must be stopped. If needed, the UK government should impose this policy.
In a G20 context, a coalition of the willing to tackle tax havens and increase the transparency of company ownership would continue to keep the pressure up. More countries working together will also generate the information needed around global asset ownership, thus helping to create a network of linked registers that will make it much easier to follow the money.
Regulate the enablers
Finally, illicit financial flows and money laundering are only possible with the support of professional enablers, who create the complex structures to maximise secrecy and find a home for dirty money from all over the world. As their role is essential to making the system work, another pillar of a G20 agenda on corruption should be an initiative to bring proper regulation to lawyers, accountants, company service providers, and others who are at risk of handling dirty money.
I am delighted the Labour government committed to a new financial services bill in the 2026 king’s speech that will tackle this issue head-on. Once in force, the Financial Conduct Authority will be responsible for all anti-money laundering regulation for at-risk professional services that previously self-regulated. This is a major step forward, as the current system relied on professional bodies who often lacked the expertise or incentive to enforce robust rules. Other major financial centres will have their own regulatory landscape, but anti-money laundering efforts mustn’t be restricted to banking and financial services alone.
Part of this enabling service is the role the legal profession can play in silencing investigations and aiding secrecy. The UK has a specific challenge with strategic litigation against public participation, aka Slapps. These aggressive legal actions have become notorious for attempting to silence journalists who are trying to uncover corruption. Some modest steps forward have been made in recent years but are nowhere near sufficient to tackle some of the most powerful law firms in the country that are experts in this type of lawfare. I know ministers are fully committed to stopping this abuse of power, and I hope they will find a legislative vehicle as soon as possible to make the necessary legal changes. It would send a strong signal ahead of the G20 that the UK is serious about preventing the manipulation of our legal system in favour of secrecy for those who have enjoyed impunity for far too long.
Time for bold action
The problem of illicit finance is not just about the denial of much-needed capital for social services or the productive economy. Opaque dirty money has a material effect on our politics and democracy, and we should work with like-minded countries to keep dirty money out of our politics. There is surely no reason why political donations using cryptocurrency should be permitted, given the inherent difficulties in establishing the source of funds and making donor checks. The government has announced a moratorium on crypto donations in Britain, and it would be healthy for global democracy to build a coalition of countries to do the same.
Multilateral cooperation on corruption and dirty money, like many other progressive causes, has become harder in recent years. Autocrats and dictators depend on illicit finance for their own survival. It’s how they steal from their own countries and build their patronage. But it is not an intractable problem. After Russia’s illegal full-scale invasion of Ukraine in 2022, many countries did take action, including expanding sanctions against oligarchs supporting Putin, increasing transparency of foreign-owned property, and freezing assets. These measures have had an impact, but there is a lot more to do.
The UK is uniquely well placed to show global leadership on illicit finance and corruption in the coming 18 months. Bold leadership on this issue will resonate with voters at home who want to see cleaner politics and corruption rooted out of society. It would contribute to a fairer, more peaceful global society, too.
Image: Istock
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