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Revealed: Britain’s own Applebys and Mossack Fonsecas at the heart of 52 global corruption scandals

Revealed: Britain’s own Applebys and Mossack Fonsecas at the heart of 52 global corruption scandals

UK defences too weak to prevent creation of companies to facilitate corruption

 9th November 2017, London – Transparency International UK has analysed 52 cases of global corruption – amounting to £80 billion – and found hundreds of UK registered shell companies at the heart of these scandals. At the same time the UK’s system to prevent this abuse is failing.

This new research, Hiding in Plain Sighthas found 766 companies registered in the UK that have been directly involved in laundering stolen money out of at least 13 countries. These companies are used as layers to hide money that would otherwise appear suspicious, and have the added advantage of providing a respectability uniquely associated with being registered in the UK.

Our evidence has shown this is no accident. The UK is home to a network of Trust and Companies Service Providers (TCSP’s) that operate much like Appleby and Mossack Fonseca – companies at the heart of the Paradise and Panama Papers – who create these companies on behalf of their clients.

TCSPs will register these companies to UK addresses, often nothing more than mailboxes. This has created ‘company factories’, where thousands of companies can be registered to unoccupied buildings with little to suggest any meaningful business occurs. We found half of the 766 questionable companies we identified were registered to only 8 separate addresses – in one instance a run-down building, next to a bank on Potters Bar High Street.

The recent Manafort indictment in the US also revealed that one of the companies alleged by the FBI to have been used to launder money was registered to a house in North London.

Duncan Hames, Director of Policy Transparency International UK, said:

“As fingers point to jurisdictions like Panama and Bermuda, it shames the UK that companies are being set up under our noses, with the sole purpose of laundering illicit wealth; money very often stolen from some of the poorest populations in the world, starving them of vital resources.”

“The UK is home to industrious company factories from which unscrupulous individuals provide the corrupt with the means to hide their ill-gotten gains. The UK should recognise it has its own Applebys and Mossack Fonsecas here on our doorstep.”

Weak Defences

With the UK as a destination of choice for those seeking to hide illicit wealth, the UK’s own defence mechanisms have proven to be woefully inadequate. Just six staff in Companies House are charged with policing 4 million companies, TCSPs have a poor track record of identifying and reporting money laundering with only 77 of the 400,000 suspicious activity reports filed last year coming from this sector.

Meanwhile TCSP’s can set up companies in the UK even if they are not registered or based here. This means they avoid being subject to UK regulation, and instead are bound by local laws, which are often unenforced or so weak as to be ineffective.

Duncan Hames said:

“Since the Panama Papers the UK has made progress in targeting corrupt money but in a complicated and global system it’s often the case that as one area of weakness is addressed, more are discovered by those intent on channelling dirty money. Approaching Brexit it’s essential that the UK sends a clear signal that it won’t be a laundromat for corrupt individuals from around the world. It could start by ensuring it properly resources those who are meant to be our first line of defence, such as Companies House.”

***ENDS***

Transparency International is the civil society organisation leading the fight against corruption 

Key Stats:

  •  766 UK companies involved in 52 corruption and money laundering cases worth up to £80 billion
    • Those 766 companies could have cost a total of just £15,000 to set up
    • One quarter of these are still active today
    • Half of these registered to just 8 different addresses
  • Just 6 staff in Companies House police the integrity of some 4 million UK companies
  • TCSP’s filed just 77 of the 400,000 suspicious activity reports last year, which are designed to flag possible money laundering.

Key recommendations:

  • Prohibit non-UK registered agents from setting up companies to avoid TCSPs with no presence here, circumventing UK anti-money laundering checks
  • Use financial incentives to encourage UK companies to hold a UK bank account, discouraging the use of offshore bank accounts
  • Provide Companies House with sufficient resources to identify suspicious activity
  • UK Government should seek to apply a “failure to prevent” approach to money-laundering, meaning TCSP’s are held more accountable for forming companies that are used to launder money
  • Overhaul the UK’s anti-money laundering system

Contact:

Dominic Kavakeb
020 3096 7695
079 6456 0340
Dominic.kavakeb@transparency.org.uk

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Read 1146 times Last modified on Thursday, 9 November 2017 10:03

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