Illicit funds are inflating UK house prices by an average of £3,000, according to new research by anti-money laundering and digital compliance provider SmartSearch. This influx of suspicious wealth into the UK property market is contributing to higher house prices and making it increasingly difficult for typical families to purchase homes. The situation is especially acute in London, where the impact is estimated to be more than £11,000 per property on average.
Extent of Illicit Funds in UK Property Market
SmartSearch analysis reveals that since 2016, over £11 billion of suspicious wealth has been channelled into UK real estate. More than half of these transactions involve shell companies registered in British Overseas Territories, which allow buyers to remain anonymous. Around 87,000 properties across England and Wales are owned by such anonymous entities based in tax havens, with a combined estimated value exceeding £100 billion. London alone accounts for 40% of these anonymously owned homes, indicating it as a hotspot for illicit money in property investments.
Impact on House Prices and Market Distortion
The presence of illicit funds inflates house prices by increasing demand and encouraging inflated offers for quick deals. In prime London boroughs like Westminster and Kensington & Chelsea, this has led to price inflation as high as 20%, making it almost impossible for first-time buyers and local families to compete. These areas have reportedly seen the rise of “lights-out streets,” where luxury homes remain empty while local communities face housing shortages and affordability challenges.
The average inflation caused by illicit funds in house prices across the UK is approximately £3,000, with London suffering the most significant impact above £11,000. This distortion affects not just luxury markets but spreads across broader regions, imposing an additional financial burden on ordinary homebuyers.
Role and Challenges of Estate Agents
Estate agents are legally required to prevent money laundering in property transactions; however, SmartSearch found many are not fully compliant with anti-money laundering (AML) obligations. Nearly 14% of estate agents operate without AML supervision, and enforcement has led to fines totaling over £1 million for nearly 200 agents. Additionally, about 56% of AML-registered agents do not consistently verify individuals controlling business clients, and around 3% never carry out such verification checks. This creates loopholes exploited by criminals using front companies to launder money through property purchases.
Phil Cotter, CEO of SmartSearch, emphasized that if estate agents do not take AML responsibilities seriously, the UK property market will continue to attract dirty money, worsening affordability issues for lawful buyers.
Government and Regulatory Perspective
The UK government recognizes the property sector as highly vulnerable to money laundering due to the high values involved and the relatively low level of scrutiny possible through corporate buyers. Security ministers have urged estate agents to fulfill their legal duties in reporting suspicious transactions. Despite this, estate agents submit comparatively fewer suspicious activity reports compared to accountants and lawyers, suggesting underreporting in the property sector.
SmartSearch advocates for the use of electronic anti-money laundering technology to enhance accuracy and efficiency in verifying buyers and detecting suspicious activities. Automated systems can link with major data providers, enabling estate agents to conduct thorough and reliable identity checks, including remote verification options. Such technological measures are seen as essential tools to reduce errors and thwart money laundering attempts in property transactions.
Broader Economic and Social Consequences
The influx of illicit funds into the housing market has broader implications beyond price inflation. It undermines market integrity, reduces transparency, and disadvantages genuine buyers—especially first-time purchasers and local communities. The existence of luxury properties owned anonymously by offshore entities often leads to those homes remaining empty, exacerbating housing shortages and community cohesion issues in affected areas.
Money laundering through property is linked to serious organized crime, including drug trafficking, human trafficking, and terrorism financing. Thus, preventing illicit funds from entering the property market is not only a matter of economic fairness but also national security.
Data and Methodology
SmartSearch’s estimates are based on analyses of property transactions involving suspicious wealth and shell companies. The research utilizes data on property ownership, transaction values, and AML compliance records of estate agents along with publicly available property price data from sources such as HM Land Registry. The UK House Price Index and transaction data help quantify the impact of illicit funds on market prices.
AML Editor’s article was originally published in mortgagestrategy on 26 August 2025