News 25th Oct 2019

How we uncovered the UK businesses entangled in major corruption and money laundering cases

Ben Cowdock

Senior Investigations Lead

Ben is responsible for leading research into corrupt money entering the UK. He joined TI-UK as an intern in September 2015, helping support the work of the UK advocacy and research team. Ben holds an MA in Governance and Corruption from the University of Sussex.

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From suspicious spending splurges to London kleptocracy bus tours, the UK’s dirty money problem has caught the public eye in recent years. Much of this attention has focussed on the palatial properties and outrageous opulence enjoyed by those who have abused the power entrusted in them by their people for personal profit. However, those responsible for providing services to support these extravagant lifestyles have received far less scrutiny.

At Your Servicea new report by Transparency International UK – seeks to change this. Covering banks to boarding schools, our investigation presents fresh evidence on nearly 600 businesses and institutions across a broad range of sectors who have helped the world’s corrupt, obtain, move and defend their ill-gotten gains.

Using open-source material from leaks, court documents public datasets and investigations by journalists, we collected and analysed over 400 cases of high-level corruption and associated money laundering covering 116 countries of origin. Given that detection and prosecution rates of corruption are widely accepted to be low, the figures contained in this report are likely to be the tip of the iceberg.

The subsequent analysis of these cases took a variety of forms including:


Laundromat Data crunching

Over the past five years, the Organised Crime and Corruption Reporting Project (OCCRP) has published investigations based on leaked banking data, showing the movement of hundreds of billions of pounds in criminal and suspicious funds from the former Soviet Union. We analysed tens of thousands of these transactions and identified over £570 million flowing into or from British bank accounts at more than 70 financial institutions.

We then looked at UK businesses that received funds from the anonymous shell companies with Baltic bank accounts used to move money in this scheme. We found the following:

  • Nearly £9 million was paid to 32 UK law firms, with some of the payment references bearing the hallmarks of trade misinvoicing – a common technique used to avoid scrutiny when moving illicit funds.
  • 433 payments to 37 UK architectural and interior-design firms amounting to £8.3 million. Corrupt individuals may contract these businesses to carry out work on property they own to increase its value and launder money at the same time.
  • 492 payments worth more than £4.1 million to 177 different educational institutions. This cash found its way to prestigious independent schools like Charterhouse and Harrow, and world class universities including University College London and the University of St Andrews.


Shell Company Network analysis 

Following our reports Hiding in Plain Sight and Offshore in the UK, we have continued to monitor the use of UK companies in economic crime. In our research for this new report, we identified 929 UK companies involved in 89 cases of corruption and money laundering, amounting to £137 billion in economic damage. 260 of these companies were Limited Liability Partnerships, most of which were controlled by identikit companies registered in secrecy havens like Belize and the Seychelles. These secretive offshore entities control hundreds – sometimes thousands – of UK companies, making it hard to identify who really owns them.

To start assessing the potential scale of abuse of UK companies, we identified all of the officers for LLPs involved in the corruption cases mentioned above and then tried to find where else they turned-up on Companies House. Using this approach, we found at least 17,000 UK companies controlled by the same secretive entities. Over 5,400 of these suspicious companies remain active. There is evidence to suggest there may be only a few firms incorporating and managing this network of suspicious companies, with 6,073 of the 17,000 registered at just 10 English addresses.


Land Title investigation

Using open-source material, we have identified 421 properties worth over £5 billion, bought with suspicious wealth. We then checked the land titles for these properties to identify 56 law firms involved in facilitating 132 of these transactions. In most cases they were the registered address of secretive companies used to hold the property.

Using Land Registry’s dataset on UK property owned by overseas companies, we found these 56 law firms have been involved in at least 4,200 further transactions involving similar secretive corporate vehicles. Due to the opacity of the structures involved, we do not know who owns these properties at present.

Because much of this activity is not recorded in publicly accessible documents, the businesses we were able to identify in the report only represent a small piece of a much larger puzzle. The true involvement of UK firms and institutions is likely to be far higher.


What Next?

This report casts new light on the persistent problem of the UK’s weak money laundering defences, giving food for thought to Government, regulators and the private sector alike. The UK plays a pivotal role in stopping corrupt individuals stealing from their people and stashing their loot in safe havens. In recent years, successive Governments have sought to address this problem through the introduction of tougher measures to investigate suspect wealth and reform of Companies House. However, to address the threat of corrupt wealth tarnishing the UK’s reputation irreparably, more urgent and radical action is needed.

  • No place to hide: The Government should set out a clear and public timeline for how it intends to enable corporate transparency in Britain’s offshore financial centres and ownership of companies holding UK property as soon as possible
  • No one to help: The Government should radically overhaul oversight of businesses’ defences against dirty money, which is currently not fit for purpose, and deliver on its commitment to consult on a new “failure to prevent” offence for economic crimes
  • No impunity: The Government and law enforcement agencies should undertake and implement a full review of the resources needed to tackle dirty money entering the UK