Kleptoscope Two: The Alchemy of Making Money from Sand

The panel, chaired by prominent investigative journalist Oliver Bullough, examined ground-breaking stories focusing on Arab Spring countries. They explored how kleptocrats from the region have used the services of the British capital to retain and launder their money.


Ala’a Shehabi of Bahrain Watch addressed the Frontline Club, explaining the extent corruption has plagued Bahrain. In recent years, extensive sections of the island’s surrounding waters have been dredged and reclaimed as land, with more than 65 km2 of Bahrain’s land having been privatised in the process ‘the sea was literally disappearing’.

Corrupt Bahraini officials and others exploited this land reclamation as a means to generate vast wealth, selling land and the developments built upon it for enormous profits. The wealth created in the process has since flowed into London, and is particularly prevalent in the capital’s housing market.

‘London is being used to… hide and stash dirty money away. It is a guaranteed safe investment… because it has an accelerating housing market and no one will know who you are. The minute we expose who these people are, the incentives to come to London will disappear,’ explained Shehabi.

Bahrain Watch has worked to expose the financial exploitation committed by the nation’s elites, and has had recent success in revealing the money flowing through the King’s own company ‘Premier Group’. 21 high-end London properties belong to the company’s portfolio, including The Four Seasons and The Marriot on Park Lane. Shehabi described the company as being involved in the ‘alchemy of making money from sand’.

Prior to receiving a leak detailing the corporate structure of the group the information pertaining to the company’s ownership structure and property holdings had been successfully obscured. When Bullough asked her about the difficulty of exposing financial malpractice in Bahrain before she obtained this data, Shehabi said ‘It was a web of information which had been completely obscured. Who owns the sea? This was never registered as public land.’

Shehabi points to the Arab uprising of 2011 as being a pivotal moment for the nation’s people in finally registering their discontent at the widespread corruption that had engulfed the island and its political class. However, she decried the failure of media coverage to pick up on this source of anger as a critical driving force for the political revolt, ‘that’s a story that hasn’t been properly told yet’.

Speaking passionately about the struggles she now encounters in trying to access her homeland, Shehabi concluded by referring to the important work she is now doing in London to combat the flow of wealth out of Bahrain and away from the nation’s own citizens.

Ben Cowdock of Transparency International outlined the sheer scale of the illicit money generated during the Arab Spring, much of which has since flowed through the UK. The National Crime Agency estimates that tens if not hundreds of billions of illicit cash flows through the UK each year.

The misappropriation of state budgets within certain Middle East states in recent years has resulted in huge sums of money being accumulated in the hands of a very select few individuals. Cowdock gave the striking example of Syrian state finances, with Bashar Al Assad’s cousin reportedly owning 60% of the national economy in 2011 according to Transparency International. Illicit money owned by such individuals has flowed into London in vast quantities following the Arab Spring.

Explaining why the capital is a hive of activity for the channelling of such funds, Cowdock said: ‘The UK is a safe haven for corrupt money. It’s a safe haven because it’s a global financial hub, so trillions of pounds come through the UK each year. It’s easy to hide that money within legitimate money. It’s a stable legal environment, you’re unlikely to have your assets taken off you by the government… and has a thriving property market so you’re able to buy gold blocks of bullion in the sky.’

Referring to the network of ‘professional enablers’ that exist within the UK, Cowdock detailed the money being made by professional services in London through the trade of illicit money via property. He highlighted legal firms, banks and estate agents as being just a few of the industries who are generating money as a result of this financial traffic, be that implicitly or explicitly.

The UK’s close links with overseas territories such as the British Virgin Islands and other notable tax havens has made it an increasingly attractive destination for illicit money. Cowdock spoke passionately about the need for the UK to bolster transparency, asset recovery systems and defences against such practice in the future if the capital and the nation as a whole is to combat the problem effectively.

Richard Brooks of Private Eye revealed to the audience the map Private Eye have put together detailing property acquired by overseas companies within the UK from 2005-2014. The map helps to track the flow of dirty money in the UK, designating the ownership details of the vast extent of real estate owned across the nation by foreign companies.

Brooks suggested many of these companies have links to offshore banking and investment programmes, which act as a channel and safe haven for illicit funds.

When asked by Oliver Bullough as to why we put up with such practices, Brooks replied jovially that the UK is keen not to put off entrepreneurs,’we are open for business remember.’

Brooks delighted the crowd when he revealed the case of an underground parking space in Kensington being owned by a company in St Lucia, detailing the truly absurd flow of capital and ownership structure in this instance. His point was well made, he documented to the audience extremely effectively the nature of the high-end property market in London and its murky finances using this and other examples.

Responding to a question pertaining to the importance of greater regulation in this area, Brooks made the moral case for a tighter legal framework, saying: ‘laws serve a purpose of saying we don’t think this is great, meaning such behaviour becomes less socially acceptable.’ Cowdock supported this view, arguing there is a need to ‘create larger disincentives for companies and individuals involved and raise awareness of the moral and financial cost of enabling and facilitating dodgy money transactions.’

When asked about comparisons within Europe regarding the issue of illicit money flows, Brooks revealed that ‘the EU has been a pretty positive force in the last few years regarding financial transparency. It’s certainly dragged along other countries like the UK.’ He expressed concern over the potential impact of Brexit in this area.

The panel united in calling for greater transparency of data from central government, better protections and incentives for whistle-blowers and enlarged anti-corruption budgets.

Cowdock finished: ‘dirty money follows the path of least resistance. Greater regulation raises the obstacles to its passage.’

*This was the second talk in the Frontline Club’s series of Kleptoscope events investigating corruption and dirty money in London: interrogating its origins, its launderers and how it gets spent. The first Kleptoscope event featured three ground-breaking stories focusing on the former Soviet Union, and explored how Russian kleptocrats have used the services of the British capital to retain and launder their money; how London’s property market has become a piggy bank for the world’s corrupt elite; and how ex-Soviet businessmen have covertly funded MPs and parliamentary groups, gaining preferential treatment as a result.