Penalises London area, showing subtlety (7)
I believe the answer is:
finesse
'subtlety' is the definition.
(I've seen this in another clue)
'penalises london area' is the wordplay.
'penalises' becomes 'fines'.
'london area' becomes 'SE' (abbreviation for South East).
'fines'+'se'='FINESSE'
'showing' is the link.
(Other definitions for finesse that I've seen before include "Subtly skilful handling of a situation" , "Subtle skill - bridge manoeuvre" , "isky card play" , "Skilful elegance or expertise" , "Refinement" .)