An estimated £200 million, believed to be from corruption overseas, has been spent on UK properties since 2004 with the amount probably only being the tip of the iceberg, a campaign group said.
Transparency International has urged the UK to tighten its money-laundering rules by requiring information on the ownership of holding companies in offshore tax havens, if they were used for acquiring residential or commercial property.
"There is growing evidence that the UK property market has become a safe haven for corrupt capital stolen from around the world, facilitated by the laws which allow UK property to be owned by secret offshore companies," said Robert Barrington, executive director of Transparency International UK.
According to the anti-corruption watchdog, the UK police investigated the purchases of properties worth over £180 million over the past decade as they suspected the money was tied to corrupt deals, the anti-corruption watchdog said.
It added 75 per cent of those purchases involved offshore secrecy to hide the identity of the buyers.
According to the report, almost one in 10 properties in the City of Westminster and one in 14 in Kensington and Chelsea were owned by companies registered in offshore accounts.
While many registered their properties in offshore havens to avoid their tax obligations in the UK, according to campaigners, others did so to hide slush funds.
More than a third of foreign companies holding London property were incorporated in the British Virgin Islands, with Jersey, the Isle of Man and Guernsey the other preferred locations in that order.
According to Barrington, it was astonishing that the UK had sleepwalked into the situation, and the government needed to act quickly to make sure that the UK did not become the destination of choice for global corruption.
The Metropolitan Police admitted that the current system meant it could take years to unpick the layers of corruption and secrecy which ultimately resulted in the purchase of UK properties.
According to DCI Jon Benton, of Scotland Yard's Proceeds of Corruption Unit, the UK property market was attractive to criminal investors, Mail Online reported.
He said, the London property market was attractive for many reasons, not least because of the safety of the investment and that it provided a home in this great capital.