Government attempts to stop the UK property market being exploited by international money launderers are “totally inadequate” and the country has instead “laid out a welcome mat” to criminals, the House of Commons home affairs committee has said.

The influential panel of MPs, chaired by the Labour backbencher Keith Vaz, said it was disgraceful that at least £100bn was being laundered through the UK every year and astonishing that just 335 out of 1.2m property transactions last year were deemed to be suspicious by law enforcement officials.

That means only 0.01% of the 2.4 million buyers and sellers in the UK generated suspicious activity reports at the National Crime Agency (NCA), whose system, Vaz said, was not fit for purpose.

“The proceeds of crime legislation has failed,” Vaz said. “London is a centre for money laundering, and its standing as a global financial centre is dependent on proactively and effectively tackling money laundering. Investment in London properties is a major route which tarnishes the image of the capital. Supervision of the property market is totally inadequate.”

The NCA’s system gathers suspicious activity reports from lawyers, accountants, bankers and other professionals but is overwhelmed with more than 380,000 reports per year, when it is designed to handle 20,000.

Estimates of the annual volume of ill-gotten gains laundered through the UK vary enormously. Vaz took his £100bn figure from the charity Transparency International but the report also cites evidence from Donald Toon, director of the economic crime command at the NCA, that it was likely to be “hundreds of millions of dollars”.

Last year, Toon claimed the London property market had been skewed by laundered money and that prices were being artificially driven up by overseas criminals who wanted to sequester assets in the UK.

The MPs said it remained “far too easy for someone intent on laundering money to buy a property with their ill-gotten gains, and rent it out in a very buoyant and robust letting market and take in clean money in perpetuity”.

The committee said letting agents must start undertaking appropriate due diligence on clients and making reports to the NCA’s suspicious activity reporting regime.

Vaz said the NCA’s system was so overburdened that it was “a futile and impotent weapon in the global fight against criminal financing, with no indication from the Home Office as to when a new state-of-the-art system will be purchased”.

An NCA spokesman confirmed the current system was “not effective or efficient” and said the agency was waiting for the conclusion of a Home Office review of the suspicious activity reporting system before deciding how to update it.

The stark criticisms come despite several recent commitments from government to clamp down on London being used to launder corrupt money from around the world. In May, David Cameron announced plans to require all foreign companies buying property in the UK to disclose their true owners in a public register for the first time.

He said: “We know that some high-value properties, especially in London, are being bought by people overseas through anonymous shell companies, using plundered or laundered cash.”

Before the change of prime minister and cabinet reshuffle, the chancellor, George Osborne, had told MPs that primary legislation to introduce the register was planned for after May 2017.

In April, the then home secretary, Theresa May, launched a new “action plan for anti-money laundering and counter-terrorist finance”. It set out to increase police capabilities to disrupt criminals and terrorists, reform the supervision of companies so that those that facilitated money laundering were tackled, and to extend the reach of law enforcement agencies and increase international co-operation.

Chido Dunn, an anti-corruption expert at the NGO Global Witness, said: “Dirty money in London’s luxury property market is endemic. This latest report reinforces how urgently action is needed to tackle the problem. Two months ago the government promised to introduce clear measures to do this. If these are swiftly enforced and fully resourced, they will go a long way to ensuring money launderers can’t find safe haven in the UK. The new government must treat this as a priority for the coming year, or we risk rolling out the red carpet to the corrupt and criminal.”

A Home Office spokesman said: “We are committed to attacking criminal finances, making it harder to move, hide and use the proceeds of crime, as set out in the serious and organised crime strategy.

“And there is clear evidence we are making progress in this effort: the government seized a total of £1.2bn from criminals between April 2010 and March 2016, with more assets recovered in 2015/16 than ever before.”