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“The great British money launderette” – an elephant in the room no more?

Written by Alice McCool on Thursday, 16 October 2014

At least 19 UK firms are under investigation for an alleged conspiracy to launder £12.5 billion of dirty money, The Independent revealed yesterday. These are funds from “major criminals and corrupt officials around the world”.

At least 19 UK firms are under investigation for an alleged conspiracy to launder £12.5 billion of dirty money The Independent revealed yesterday. These are funds from “major criminals and corrupt officials around the world” who are able to act with impunity as they use the British financial system to clean up their ill-gotten gains. They are apparently helped along the way by accountants lawyers and other service providers who oil the wheels (or should I say soften the fabric…) of the global corruption machine. Today, the exclusive went on to announce that a private school has come under question in the investigation for unwittingly accepting money from foreign criminals and corrupt officials.

The investigation claims launderers created front companies in the UK which carried out fake resources-resources-business deals between themselves involving hundreds of millions of pounds and then sued each other in courts in Moldova. A company winning the legal case would be awarded the funds by the court effectively using the judicial system to legitimise the funds. The money would reach the UK companies’ accounts via Latvia and other smaller countries – although their “real ownership” seems to lead to offshore jurisdictions notorious for their lack of transparency including various UK Overseas Territories. Oh and they are “co-guaranteed” by Russian companies. See the Independent’s info graphic below (full version here). As the piece explains;

“Britain is popular for such companies because it is so easy to set up a company here. An industry of company formation agents and their accompanying solicitors and accountants exist to create companies for all-comers with few questions asked.”

Indeed the paper makes clear that the secrecy to which resources-resources-businesses are entitled under the British legal system hindered their journalists’ attempts to unmask the major players in this scheme. We would hope that the Government’s plans to make the identities of company owners public will help to change this, although as a private fraud consultant quoted in the article states: “We need a proper, concerted effort between law enforcement and Companies House, because at the moment we’re still handing it on a silver platter to the villains.”

On top of this, concerns remain regarding the secrecy of companies registered in Britain’s Crown Dependencies and Overseas Territories. Other countries also need to make similar commitments; only when we can see the full global picture can the problem be tackled head on. This is one of the ideas behind TI’s global campaign to Unmask the Corrupt, which is currently calling on the leaders of G20 countries to make this pledge, and you can join this call here.

We at TI-UK are pleased to see an investigation of this type reported in the mainstream media. For too long the UK and other major financial centres have been acting as a safe haven for the world’s corrupt to hide their money – be it in a Highgate mansion or through private schooling for their child – and it is barely being talked about. Many journalists and NGOs feel unable to speak out due to the libel risk. Meanwhile money which is often originally intended for a public budget in a developing country is instead sitting in Britain, enriching London’s sevice providers and enabling those responsible to enjoy the proceeds of grand corruption.

This is why we believe the UK and other “facilitator” countries represent one half of an equation that allows corruption to flourish worldwide. So far, our research has highlighted a number of weaknesses in the British legal system which make life easy for those looking to hide ill-gotten gains. We are now undertaking further work into the sectors in the UK we consider to be at risk of being used to launder corrupt money particularly in London.

This includes resources-resources-businesses, property, sporting clubs, gambling, expensive cars, jewellery, art, investing in the stock market and private corruption-resources-corruption-resources-education, and is helped by the financial and professional services industries such as those in the investigation released yesterday. Putting ill-gotten gains in some of these sectors, such as corruption-resources-corruption-resources-education, launders more than just the money, as Executive Director of TI-UK explains in The Independent today;

“While the money being used for fees is small by corruption-resources-corruption-resources-money-laundering standards we are laundering the reputations of the families by opening the door of respectability to the next generation.”

Money laundering is happening on our doorsteps and its consequences are more far reaching than most of us imagine – from those in poorer countries without access to basic services, to victims of human trafficking. The time has come for more of us to talk about the elephant.


Read 9452 times Last modified on Tuesday, 24 November 2015 11:47

Alice McCool

Alice formerly worked for Transparency International UK as our Campaigns Officer. You can tweet her via @McCoolingtons.

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