PRESS RELEASE • JULY 6, 2023
New in-depth analysis finds unacceptable level of money laundering risk in French real estate, despite transparency measures
Non-compliance, incomplete data and loopholes are creating a brick wall for attempts to follow flows of dirty money into French real estate, according to a new report by Transparency International France, Transparency International and Anti-Corruption Data Collective (ACDC). Six years after France began collecting information on the beneficial owners of companies, almost a third of legal entities in France have failed to comply. Partly as a consequence, more than 7.33 million parcels of land – which could contain one or multiple properties – in France are anonymously held. This effectively creates a dead-end for efforts to follow the money of white-collar criminals, kleptocrats and sanctioned elites into French real estate, which is known to be a favoured destination for corrupt cash.
The report, Behind a Wall: Investigating Company and Real Estate Ownership in France, is based on an in-depth analysis of publicly available records on French-registered companies and real estate. The authors scraped roughly five million individual web pages containing company information from France’s company beneficial ownership register and cross-referenced the results with data from the French cadastre, or land registry plan.
The analysis returned alarming results. More than 1.53 million legal entities registered in France – just under a third – have not declared who ultimately owns and benefits from them, despite being required to do so since 2017. Nearly 10.35 million parcels – the smallest unit of the cadastre – across France are owned by private legal entities. Yet, in 7.33 million of these, the real owners remain unknown. The vast majority of these companies did not provide data on their real owners or did not appear in France’s beneficial ownership register at all. The latter may include foreign companies, which can own real estate in France without registering a French company that would be subject to transparency requirements. As a result, 71 per cent of all corporate-owned French parcels are anonymously held.
Despite the high number of companies failing to comply with beneficial ownership disclosure rules, only one criminal sanction has been imposed between 2016 and 2020, French authorities confirmed to the report’s authors. Authorities in France have presented slightly different compliance figures, but researchers have been unable to independently verify the government’s numbers.
Sara Brimbeuf, head of the illicit financial flows programme at Transparency International France, said: “Fifteen years after the start of the first ‘ill-gotten gains” cases in France, and at a time when tracking down the real estate assets of Russian PEPs and oligarchs is supposed to be a priority, it is unacceptable that more than two-thirds of corporate-owned real estate is anonymously held. We call on the authorities to quickly close loopholes, improve data collection and verification, and sanction companies that continue to keep their owners secret.“
The research also highlighted issues of data quality and completeness in the French beneficial ownership register. For example, historical data is not included, meaning that individuals expecting to come under scrutiny can disappear from the register by transferring ownership of their company to a relative.
Maíra Martini, research and policy expert on corrupt money flows at Transparency International, said: “We have known for a long time that luxury French real estate is hot property for criminals and the corrupt looking to stash and clean their ill-gotten gains. Transparency measures of recent years should have been game-changing, but we have a long way to go to ensure that these tools achieve their full potential. The authorities should scale up their fight against money laundering through the real estate sector, and bring data collection and reporting requirements in-step with the level of risk.”
Parallel investigations by the Organized Crime and Corruption Reporting Project (OCCRP) have revealed more than a dozen properties in France linked to alleged money launderers, politicians accused of corruption and their relatives from across Latin America.
Additionally, the authors of Behind a Wall were able to identify 166 Russian persons of public interest listed in the French beneficial ownership registry, including Russian politicians, businesspeople, bureaucrats, journalists as well as their close family relatives. Almost half of their companies are société civile immobilière – a legal arrangement often used to purchase real estate properties in France. The Russian-owned companies were more than twice as likely to be registered at a “mass address”: a key red flag in the company formation process. The companies own parcels of land with properties ranging from villas in Saint-Tropez to ski chalets in the Alps and luxury apartments in the many of Paris’s most glamorous arrondissements.
David Szakonyi, co-founder of Anti-Corruption Data Collective, said: “The fact that journalists and researchers could identify these persons of interest and their properties in France speaks to the importance of having this information freely accessible in the public domain. Unfortunately, our analysis suggests that these cases could be merely the tip of a corruption iceberg. With so many companies failing to declare who controls and benefits from them, investigators will keep running into a wall until the compliance rate comes up and data completeness and accuracy issues in the register are fixed.”
Transparency International France, Transparency International and ACDC recommend that the French authorities move quickly to increase the cost of non-compliance, and improve their own data collection and verification mechanisms. They should also address money laundering risks associated with specific company types, the real estate sector and foreign companies.
