16th IACC

Luxury investments, such as in goods and real estate, are among the preferred means for corrupt individuals to hide the illicit origin of their funds. The proceeds of corruption are often used to purchase real estate, sports cars and limousines, yachts, jet planes, precious metals and jewellery and art works. By doing so, the corrupt not only enjoy the luxurious benefits of their corrupt cash, but they also translate that stolen cash into an investment that rarely loses value and can be converted (and laundered) at a later date. Luxury real-estate has been in the news a lot this year. Investigative journalists have uncovered scandals involving corrupt cash being used to purchase luxury properties in New York and London, and shedding light on real estate agents willing to make it happen. It is said that billions of dollars have exited China and bought property in high-end neighbourhoods around the world. 70% of those purchases in the US were made entirely in cash. The value of transactions in the high-end art market has ballooned and it is likely that a large part of this is attributable to the money laundering opportunities offered by the trade in these products.

Conversely, in markets where there has been greater scrutiny of corruption we have seen a fall off in the trade in luxury goods. Prada’s annual profit fell 28% last year, much of which was attributed to China’s corruption crackdown.

Are these sectors doing enough to make sure they are clean, corruption-free and not complicit?

Despite recent government attention to the problem of money laundering, the luxury goods sector still does not submit “suspicious transaction reports” commensurate with the amount of money they are handling. European Union data shows that in 2010 real estate agents submitted less than half a percent of all suspicious transaction reports.

Equally, according to the OECD 41% of OECD countries are not in compliance with anti-money laundering requirements with regards to businesses and professions such as real estate, casinos and luxury goods retailers.

Yet, a European risk report found that corruption and bribery is a top concern for senior executives in the luxury goods industry, when it comes to legal and reputational risk. And, of course, important luxury good markets – diamonds for example – have experienced the risk at first hand and have long cooperated with attempts to regulate the less salubrious elements of their trade.

So what could the real estate and luxury goods sector be doing to make sure they are clean?

What game changing ideas are there that can change the story?

Our panellists will tell their stories of how luxury, secrecy and corruption come together and propose new solutions to clean the sector up.