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TRANSCRIPT
BRITISH BROADCASTING CORPORATION RADIO 4
TRANSCRIPT OF “FILE ON 4” – “DIRTY MONEY UK”
CURRENT AFFAIRS GROUP
TRANSMISSION: Tuesday 6th
October 2015 2000 – 2040
REPEAT: Sunday 11th
October 2015 1700 - 1740
REPORTER: Tim Whewell
PRODUCER: Simon Maybin
EDITOR: David Ross
PROGRAMME NUMBER: PMR540/15VQ5732
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THE ATTACHED TRANSCRIPT WAS TYPED FROM A RECORDING AND NOT
COPIED FROM AN ORIGINAL SCRIPT. BECAUSE OF THE RISK OF MISHEARING
AND THE DIFFICULTY IN SOME CASES OF IDENTIFYING INDIVIDUAL
SPEAKERS, THE BBC CANNOT VOUCH FOR ITS COMPLETE ACCURACY.
“FILE ON 4”
Transmission: Tuesday 6th
October 2015
Repeat: Sunday 11th
October 2015
Producer: Simon Maybin
Reporter: Tim Whewell
Editor: David Ross
ACTUALITY OF PROTEST
WHEWELL: In the small former Soviet republic of Moldova,
they’re demanding the return of a billion dollars that's unaccountably gone missing from
some of their main banks. The result, it’s believed, of a mind-bogglingly elaborate fraud.
Moldova’s the poorest country in Europe and a billion dollars is an eighth of their entire
GDP. The money’s said to have gone from their now very angry capital, Chisinau, to calmer,
statelier Riga, in Latvia ….
ACTUALITY OF BELLS
WHEWELL: Via a massive detour ….
SEYCHELLES MUSIC
WHEWELL: To the palm-fringed beaches of the Seychelles.
And, perhaps most surprisingly ….
BORN SLIPPY MUSIC
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WHEWELL: The Edinburgh housing estate where Trainspotting, the
novel about heroin addicts, was set. In File on 4 tonight, I’m entering the weird parallel
universe of shell companies and corporate service providers, where a former Scottish council
flat becomes a portal to the Indian Ocean and beyond. David Cameron has made fighting
corruption a personal priority. He’s leading an international push on company transparency.
But File on 4 has followed a trail that shows how the UK has become a world hub for dirty
money.
SIGNATURE TUNE
ACTUALITY IN EDINBURGH
WHEWELL: Well, this is a fairly smart address in Edinburgh’s New
Town. Quite a nice four-storey townhouse. We’re going to see what we can find.
This is a long way from Eastern Europe, but it’s where four firms, Scottish firms, said to be
involved in the billion-dollar fraud in Moldova are based. From Companies House, I’ve been
able to find out very little about them except the address, so I decided just to come and knock
on the door.
ACTUALITY OF KNOCKING
WHEWELL: It’s a rather scruffy door and all the paint’s been kicked
off it, two motorcycles outside.
Hello, sorry to bother you. I wonder if you can help. Do you live here?
MAN: Who are you?
WHEWELL: We’re from the BBC, we’re making a programme
about the Moldovan fraud.
MAN: Sorry, I don’t have time…
ACTUALITY OF DOOR SHUTTING
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WHEWELL: Couldn’t you just talk to us for a moment because ...
Well, the door slammed straight in my face there. There was a man with a large beard said we
don’t have time. Can we try once more?
ACTUALITY OF KNOCKING
WHEWELL cont: We really would like to talk to you if we could.
No, I don’t think they’re going to come out again.
I had so many questions. Who owned the companies registered there, why had they acquired
stakes in Moldovan banks. Questions prompted by a document that casts a rare shaft of light,
though still a dim one, on the shadowiest of worlds - the networks that conceal the origin and
ownership of huge quantities of money as they pass from corruption-ridden post-Soviet states
into the European Union. In scam after scam, British companies, shell companies, are used
to play a key role, and the leaked document suggests that they have in the Moldovan fraud
too.
ACTUALITY WITH REPORT
WHEWELL: So if you go through the report that was
commissioned from the private investigative agency Kroll, by the Central Bank of Moldova
into what happened, it’s a report of about eighty pages and there are many British UK
registered companies named here - 48, I’ve counted, UK-registered companies. Now finding
out about these companies isn’t easy, but one man who’s been doing a lot of work on this is
Richard Smith.
SMITH: Yes, I have. I used to be a database specialist. I used
to work in the London capital markets.
WHEWELL: And you’ve actually spent years, haven’t you,
investigating these kind of companies? This is a very strange world you’re in, isn’t it?
SMITH: Yes, it’s a hall of mirrors.
WHEWELL: It’s a hall of mirrors?
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SMITH: Yeah, and there’s a kind of dreary fun in working out
who’s trying to pull the wool over your eyes. A shell company is basically one that doesn’t
do any meaningful business. It’s not a dentist or a lawyer or an accountant. Its main role is
to either hold property or assets or to operate a bank account and that’s really all it does.
WHEWELL: So effectively it’s a kind of channel for funds to pass
through?
SMITH: Yes, yes - funds or assets, yes. There’s quite a big
business in setting these up. Company agents, you contact an agent, ask him to register it for
you and off you go.
WHEWELL: So let’s go on, back to the Kroll Report. The whole
thing ends with one company, which is said now theoretically to be owed all the money, the
billion dollars that disappeared in the Moldovan fraud and it’s called Fortuna United. That’s
what appears on one of the last page of the Kroll Report. Let’s look them up.
ACTUALITY ON COMPUTER
WHEWELL: So this is the Companies House website and obviously
Companies House is the central registry of all companies in Britain.
SMITH: Here we go.
WHEWELL: So this is the registration document of Fortuna United
LP.
SMITH: OK, well here it is. The general nature of the business
is general trading.
WHEWELL: General trading. Which really does not go much
further.
SMITH: Whatever the hell that is.
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WHEWELL: So the principal place of business stated to be Royston
Mains Street, Edinburgh, and there’s more useful information at the bottom, because it’s got
presenter information, meaning ...
SMITH: That’s the person who actually lobbed in the form to
Companies House …
WHEWELL: Okay.
SMITH: And it’s Mr Mikalauskas, Royston Business
Consultancy Ltd …
WHEWELL: And - another clue - Royston Business Consultancy
is also based at the same address in north Edinburgh. So they’ve not only registered Fortuna
United, they’ve also provided it with a home. And a very simple Companies House search
reveals that, in addition, they’re accommodating more than five hundred other active
companies. You might think they’d need a lot of room but you’d be wrong.
ACTUALITY IN CAR
WHEWELL: Well, we’ve left behind the grand fashionable parts of
Edinburgh the tall, elegant, grey stone townhouses of the New Town, the plane trees and the
wrought-iron balconies and we’re going down now, downhill towards the sea, towards an
altogether grittier part of town. In fact towards Pilton, where Trainspotting, the novel about
heroin addicts, was set. This is an area of very plain, pebble-dash, 1950s, semi-detached
houses and some council estates thrown around in between.
ACTUALITY AT DOOR
WHEWELL: There’s an entry phone here.
ACTUALITY OF BEEPING
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WHEWELL: The door is answered by a young woman called
Viktorija Zirnelyte. But first she has to check with her business partner, Remigijus
Mikalauskas, the man whose name appeared on the Companies House register - whether it’s
okay to talk to us.
ACTUALITY IN HALLWAY
WHEWELL: Well, we’re waiting now in the entrance. It’s a very
bare, rather dirty entrance, there’s a bike parked here, some old crates and boxes at the back.
People think about shell companies and brass plates, there’s certainly no brass plates on the
door here, really weird to think that this tiny flat with a communal entrance – basically I think
there’s four or six flats off this bare staircase, just extraordinary. The idea that one of these
companies has supposedly got the collection rights and therefore ultimately owns nearly a
billion dollars. You really wouldn’t think it from looking around.
Eventually, with her colleague’s approval, Viktorija Zirnelyte lets us into her small homely
office, which is simply the front room of the flat, a row of ring-binders on the shelves among
some photos and ornaments, looking out on a privet hedge. She’s a 36 year old Lithuanian,
trained as an accountant, who moved to Britain in 2004 and did a series of odd jobs before
she started this factory for companies.
Just roughly give me an idea of who your customers are?
ZIRNELYTE: They’re overseas clients. Mostly Latvia, Estonia,
Lithuania, Russia, Ukraine, Moldova.
WHEWELL: And they come to you and, just give me an idea - what
do they ask for?
ZIRNELYTE: What do they ask for? For the company.
WHEWELL: Your partner is called Remigijus, yeah? He’s
Remigijus Mikalauskus, yeah?
ZIRNELYTE: Yes.
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WHEWELL: So he signed the papers for Fortuna United, is that
right?
ZIRNELYTE: Fortuna United, we just incorporated it. All we
signed, it was just corporate documents.
WHEWELL: That’s the company it’s said now to have kind of
become the legal possessor or ultimately the legal owner of, you know, nearly a billion
dollars. So do you know who owns Fortuna?
ZIRNELYTE: Erm ...
WHEWELL: Do you know? Go on. Did you ask?
ZIRNELYTE: I will not comment on this.
WHEWELL: Of course, I’ve overstepped the mark. As far as she’s
concerned, this is commercial confidentiality. But whether or not she’ll tell me, Viktorija
Zirnelyte is herself legally obliged under the UK’s money laundering regulations to know the
beneficial owner of her clients. That’s to say, who has real control of their assets and this
isn’t just any client. The people behind Fortuna United apparently robbed Europe’s poorest
country of a huge chunk of its GDP. So does Zirnelyte’s firm, Royston Business
Consultancy, check that its customers aren’t setting up companies for illicit purposes?
How many kind of questions do you ask them about their business? I mean, what do you
need to find out?
ZIRNELYTE: We don’t ask details about the business. This is our
agent’s, intermediary agent job to do that. They also have to obtain all the due diligence
documents and keep it on their files. They are more close with their clients. All we need is
just to have the documents of the beneficial owner and that’s it, we don’t really need to know
much.
WHEWELL: And who is the agent then? Who is the person that
does the due diligence?
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ZIRNELYTE: Another company, intermediary. Professional
intermediary agents like us, but they are in different jurisdiction.
WHEWELL: Are they mainly in, like, in the Baltic? In Latvia?
ZIRNELYTE: Yeah.
WHEWELL: So these intermediaries in Latvia or wherever, do you
think they do do the due diligence?
ZIRNELYTE: Yeah.
WHEWELL: What do they find out? Do you know?
ZIRNELYTE: No. Obviously, one of the companies which we
registered was used in the structure for money-laundering, but really we don’t know anything
about it.
WHEWELL: But are you, are you worried now?
ZIRNELYTE: To be honest, I don’t have nothing. I don’t have
anything to worry about. I didn’t commit fraud myself or my partner didn’t do it. We
comply with all the regulations, so I … Find the people who made this fraud and convict
them, we’re nothing to do with this.
WHEWELL: Three-quarters of all the companies in Britain - and
there are now a staggering three and a half million of them, are set up through a professional
intermediary, like Viktorija Zirnelyte, known as a company formation agent or corporate
service provider. There are estimated to be about 2,600 of them - in addition to legal and
accountancy firms who offer the same services. It’s very simple to set up a company in
Britain. Agents offer to do it in an hour, for as little as £25. But the agents are supposed to
be registered with the tax authorities, HMRC, because they’re gatekeepers, the people who
should satisfy themselves that their clients aren’t involved in illicit activities. But how many
questions should they ask? The money-laundering regulations are lengthy and confusing.
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WHEWELL cont: But Jonathan Fisher QC, an expert in this area of law,
thinks the basic requirements are clear enough.
FISHER: The whole process is predicated on what is known as
risk assessment and therefore the amount of due diligence you do is going to be variable
depending on the factual circumstance of each case. Why does the client want this company
established? Why does the client want it established in this way? Why does the client want
the company to be based in a particular place, etc. There’s going to be a big difference
between, let us say, setting up a company where all the activities are taking place in a highly
regulated country, let’s take some other part of old Europe, and a situation where the money
is coming in from a new accession state and where the activities are taking place there, the
degree of comfort that the corporate service provider would want is going to be quite
different for obvious reasons, because the risk of criminality is perceived to be higher in
certain areas.
WHEWELL: Even if corporate service providers are outsourcing
their due diligence to an intermediary, as Royston Business Consultancy says it does, they
still have to question that intermediary to make sure it’s been done properly. It’s not enough
just to have the beneficial owner’s ID. And in the case of Fortuna United – which,
remember, has the rights to Moldova’s missing billion - you might have thought that such
questions would certainly be asked. HMRC lists a series of red flags that should prompt
suspicion, including "customers not local to the business" and "complex ownership structures
with the potential to conceal underlying beneficiaries". Well, Fortuna is a limited partnership
of two companies, both based in the Seychelles, a tax haven which prides itself on
confidentiality – in other words, as complex and opaque a structure as you could wish for.
How suspicious should that look to me?
FISHER: I think it should look suspicious. The test of suspicion
in law is whether a person that recognises or appreciates there is a possibility which is more
than fanciful that proceeds of crime are involved. Possibility more than fanciful: it’s an
incredibly low threshold, so from the corporate service provider’s perspective, he forms
suspicion on surprisingly little information. He should do.
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WHEWELL: But Viktorija Zirnelyte’s firm, Royston Business
Consultancy, didn’t apparently ask many questions about Fortuna United. Perhaps because,
as I gradually found out, they didn’t just register it, didn’t just provide it with an address,
they are also the directors of its constituent companies. Zirnelyte herself is sole director of
one of the two partners, Trafford United Limited. Her business partner, Remigijus
Mikalauskas, is sole director of the other, Brixton Ventures Limited. Legally, they are
Fortuna United, the people who on paper at least have the rights to all of Moldova’s looted
billion. But hang on a minute, you might say - isn’t Fortuna United a Seychelles company?
And aren’t Zirnelyte and Mikalauskas in Edinburgh? Yes, but Seychelles directors don’t
have to be in the Seychelles. Zirnelyte told me that she and Mikalauskas have never walked
its coral beaches and the company stamps weren’t flown out from its colonial-era capital,
Victoria. She got them on eBay. So it looks as though the Seychelles, Scotland, they’re just
staging-posts on a trail of obfuscation. But what Zirnelyte is certain is that the mysterious
people who’ve put her and her partner in nominal charge haven’t given them control or
responsibility. She says they are just nominees, just as Remigijus Mikalauskas is also
nominee director of another company implicated in the Moldova fraud. I asked her about his
role there.
ZIRNELYTE: He is a representative, but he’s not involved in any
day-to-day activities of the company. We don’t know what is going on in that company. We
don’t have access to any bank accounts, we don’t do anything for this company.
WHEWELL: But technically he is the director?
ZIRNELYTE: Nominee director, yeah.
WHEWELL: Nominee director?
ZIRNELYTE: Yes.
WHEWELL: Is there a difference between director and nominee
director?
ZIRNELYTE: Well, yes.
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WHEWELL: What is the difference?
ZIRNELYTE: Nominee director is just an official representative for
the authorities and he is not involved in anything.
WHEWELL: So what’s Jonathan Fisher QC’s legal opinion of
that?
FISHER: I would say its rubbish. I would say its nonsense. A
director has responsibility for the management of the company, whether he is a non-executive
director, an executive director or a nominee director; he is still a director, and so all that a
nominee director really means is that that person who is holding the position as director has
been nominated to hold that position as a director on behalf of somebody else, and in
performing his role as a director he has to understand what the company is doing, he has to be
involved in the management of the company, he has to ensure that the shareholders are
having their interests properly served.
WHEWELL: So equally responsible at law for any wrongdoing
effectively?
FISHER: Yes.
WHEWELL: And all that’s true under Seychelles law too. Zirnelyte
said that Mikalauskas was unavailable to speak to us. But it’s only because of a rare piece of
investigative luck - his unusually legible signature on the registration documents, and her
subsequent candour - that we know about their role in Fortuna United at all. It’s a limited
partnership, which doesn’t need to have a named individual behind it. And so, it turns out,
are most of the British firms implicated in the Moldova scam. In fact, in an intriguing sub-
plot to this story, most of them are Scottish limited partnerships, which explains the
Edinburgh connection. Scottish limited partnerships are a distinct and, until recently, very
obscure company vehicle. But now, financial researcher Richard Smith - the man whose idea
of fun is going through Companies House records - has devised special software to try to
understand what’s going on.
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SMITH: Scottish limited partnerships have been around
since 1907, when the law creating them was passed. For the first hundred years of their
existence nothing much happened. There were a few registered every year. Then in 2008 it
goes completely mad. Since 2008, something like ten thousand of them have been registered,
maybe fifteen thousand. When you go and put together the information from the last
eighteen months, which covers about six thousand Scottish limited partnerships, 90% of them
have corporate directors that are in tax havens overseas - like the Seychelles that we just
looked at, or Belize, or the Marshall Islands, or Panama, or the British Virgin Islands.
They’re all places where it’s pretty hard to find out who actually controls the companies, and
so what you’ve done, in effect, is import all that murkiness from offshore into Scottish
limited partnerships.
WHEWELL: In fact, the only difference between Scottish limited
partnerships and those in the rest of the UK is that Scottish ones have a separate legal
personality. That’s useful for some rather limited tax avoidance purposes. But to find out
why they’re booming, you have to explore the websites of overseas corporate service
providers - the kind of business introducers who supply Scottish-based agents like Viktoriya
Zirnelyte with many of their clients.
READER IN STUDIO: Scottish LP is by all means the bestseller of the last
three years. It looks like it will be a hit for more years to come.
WHEWELL: Says one firm that Zirnelyte told us she worked with.
READER IN STUDIO: A Scottish limited partnership became our top-selling
product.
WHEWELL: Another site says.
READER IN STUDIO: Scottish partnership is an ideal tool for those who are
not undertaking activities inside of the UK.
WHEWELL: The English in these adverts is good, but
not quite perfect. The Russian versions, by contrast - and these sites nearly all have Russian
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WHEWELL cont: versions - are clearly written by native speakers. The
two I just quoted are from firms apparently based in Latvia, targeting principally Russian
businessmen, and they’ve decided that Scottish LPs are the most confidential vehicles in all
of Europe. So if they’re the ones that really know the customers, I’d better go and find them
- in the Latvian capital, Riga.
ACTUALITY IN STREET, BELLS RINGING
WHEWELL: This is one of the medieval cobbled squares at the heart
of Riga’s old town, dominated by a magnificent 14th century red brick church. There are lots
of tourists from all over Western Europe in the cafes and the European Union flag is flying
here too. But you can also hear plenty of people talking Russian. It’s the native language of
more than a third of the population of Latvia. There are many corporate service providers
based here in Latvia, all boasting about how they can set up companies in just 24 hours and
extolling the virtues of doing business through Latvia, particularly for clients from Russia and
other post-Soviet states. They advertise Latvia as the ideal gateway for money from those
countries to enter the EU.
I’m going to visit one of those firms that described Scottish partnerships so gushingly on its
website.
ACTUALITY OF FOOTSTEPS AND DOOR CLOSING
WHEWELL: Well, the young man I met in that office refused to
give an interview on the record, but it was really very interesting. Of course, he says, the
whole trend, the fashion - as he put it - for Scottish Limited Partnerships, it’s driven
by people like me. And we advise them to take it, the single biggest reason we’re interested,
he said, is because the UK, of all the countries in the world, is the easiest and cheapest place
where you can establish a company.
It’s firms like his, as we’ve heard, that some Scottish agents - Royston Business
Consultancy and another larger one I spoke to - say they rely on for due diligence. But the
young man said his firm didn’t do any, beyond as usual asking for an ID. He passed the buck
to the customers’ banks - banks with branches in Latvia and Russia. But the Latvian banking
sector has been criticised in the past by both the European Commission and the US
authorities for being too open to the risk of money-laundering. So what of Privatbank, the
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WHEWELL cont: bank in Riga used by British partnerships through
which all the Moldovan money is said to have passed? What do they really know about their
customers?
ACTUALITY AT PRIVATBANK
WHEWELL: The clue to how this bank normally operates is in its
name, Privatbank, and I’m amazed that they’ve actually agreed to meet me. But the member
of the bank’s board who received me, Ivetta Kerpa, wasn’t giving too much away.
Privatbank is mentioned in connection with the disappearance of money from Moldova. What
was your reaction to that?
KERPA: This information provided by public sources is
incorrect and misrepresented. Privatbank has no relation to the missing billions of Moldova.
WHEWELL: Really?
KERPA: Really.
WHEWELL: But I mean, but I’ve got the report here, from Kroll,
which is based on information from the Central Bank of Moldova. That’s got the actual
account numbers in this bank.
KERPA: Regarding our bank, it is provided incorrectly and
misrepresented, yes.
WHEWELL: So, what are you saying? That those individual
companies, they do not have accounts in this bank?
KERPA: These customers, they had accounts with our banks,
but ….
WHEWELL: So those customers had accounts here?
- 15 -
KERPA: Yes.
WHEWELL: But they don’t have accounts here any longer?
KERPA: No comment.
WHEWELL: But that’s what you said, you said they had accounts
here.
KERPA: Yes, I said.
WHEWELL: But the accounts they had were...
KERPA: No comment further about this.
WHEWELL: So let me ask you then about your procedures. So if a
company comes to you and says, we’d like to open an account, this is the account in the name
of a limited partnership, itself controlled or owned by two other companies, which let’s say
are based in a famous secrecy jurisdiction, you know …
KERPA: We don’t deal with these far, far jurisdictions.
WHEWELL: But in practice these clients that we’re talking about,
it’s a UK company but that in turn is owned by another company in these faraway
jurisdictions.
KERPA: Oh no, our legislation ….
WHEWELL: You can’t find some of these …
KERPA: …. requests to receive information about ultimate
beneficiary. If we can’t find this, we refuse.
- 16 -
WHEWELL: But in practice, these clients that we’re talking about,
this is the case. That’s the most suspicious thing - a company with unclear ownership that
suddenly does a huge one-off transaction.
KERPA: I think that we can’t call some companies guilty unless
some formal trial or something will be happen.
WHEWELL: In Latvia, it’s not just banks that like to be enigmatic.
So too does the state regulator. So when, two years ago, he fined a bank for its part in
another massive international scam that also involved British shell companies. The scam
uncovered by the Russian whistleblower, Sergei Magnitsky, which defrauded the Russian
treasury of $230 million - he refused to name it, to protect its reputation. But piecing
together various clues, the Latvian investigative journalism centre, ReBaltica, concluded it
must have been Privatbank. So, what does the bank say about that? Were they caught
money-laundering?
KERPA: They asked questions regarding this, but there are no
connections or no evidence of this.
WHEWELL: But what was the sanction for then? What was the fine
for?
KERPA: Oh, banks in their activity can receive sanctions for
anything.
WHEWELL: But what was the sanction for in this case?
KERPA: Oh, let’s call this, like some minuses in internal
controlling system.
WHEWELL: So, we’re none the wiser. But the refusal to be open,
even after an apparent breach of the rules, casts further doubt on Latvia’s commitment to
stamp out money laundering. And if we’re not sure about the banks, or the company agents,
- 17 -
WHEWELL cont: in Britain or Latvia, you have to ask:
has anyone, anywhere along this chain, really done due diligence on the source of
the Moldovan money?
EXTRACT FROM DAVID CAMERON SPEECH APPLAUSE
WHEWELL: But it’s Britain, not Latvia, that’s taken to the
international stage in the global fight against money-launderers.
EXTRACT FROM DAVID CAMERON SPEECH
CAMERON: We are one of the most open and welcoming
economies anywhere in the world and I want Britain to be that country. But I want to ensure
that all this money is clean money. There is no place for dirty money in Britain.
WHEWELL: David Cameron speaking in Singapore in July. It’s a
message he repeats with increasing frequency. But can Britain really crack down on dirty
money while still making it as easy as possible for anyone to open a company here? A new
law that takes effect next year will require firms to disclose their beneficial owners. Britain
will be the first country in the world to adopt such legislation. But who’ll check that the
information put down is correct or honest? Currently there are no such checks when firms
register at Companies House, as its Chief Executive Tim Moss told me.
The perception in many cases will be people can put down whatever they like and no one’s
going to actually catch up in most cases.
MOSS: I think the wider principle here is what sort of
registration system should the UK have? Now the system that’s set up within UK law works
on the premise that the vast majority of people are good people who give you good
information and that’s put on the register and that’s done there to support the economy, and
we have one of the best and easiest places in the UK to set up a business and get trading and
carrying out that, and that’s a real benefit to UK plc. Could that system be abused? Yes,
there are things in there where that system could be abused. What we do not do and cannot
do - that’s not our remit - is to look at the sort of the pinpoint accuracy of that information.
- 18 -
MOSS cont: Our role is to accept the information from a company
and then ensure it meets with compliance with the Act.
WHEWELL: So you can’t vouchsafe for the fact that it’s accurate?
MOSS: No, we can’t, and that’s not the role that we’re asked to
perform in legislation.
WHEWELL: So you check whether they report when they’re
supposed to report but - just to emphasise - you can’t know whether what they report is true?
MOSS: We don’t know the absolute accuracy of the
information that they supply to us, no.
WHEWELL: So, Companies House isn’t supposed to check,
corporate service providers are, but sometimes don’t. What then about the people who check
on the checkers, the regulator, HMRC? Critics say it has little interest in investigating due
diligence around firms like those in the Moldovan case, because they don’t actually do any
business in this country, so there’d be no tax to collect anyway. That’s the problem the
investment fund director Bill Browder - former boss of the Russian whistleblower, Sergei
Magnitsky - says he found. Magnitsky later died in a Moscow prison and Browder has
campaigned for years to expose the scam. But he says HMRC did nothing with the evidence
he gave them.
BROWDER: What’s interesting is that if you go and investigate
these crimes, you’ll see the same names, the same corporate service providers showing up
time and time and time again. And what’s even more interesting is that when we’ve pointed
out to the HMRC, they’re just not interested. They don’t care. They don’t care that this is
going on. We’ve given them a lock solid case to say this company should have its licence
withdrawn and they’ve refused to investigate.
WHEWELL: HMRC declined to be interviewed for this programme.
But they told us they use a wide range of enforcement actions, including unannounced visits
to suspect businesses, to target the small number of firms that flout the money laundering
- 19 -
WHEWELL cont: regulations. But if you look at the number
of prosecutions of British company agents for failing to comply with the rules, you’ll find
they can be counted on the fingers of one hand. Bill Browder thinks that’s just part of a
wider problem. There’s been legal action over the Magnitsky case, he says, in most of the 14
countries that proceeds of the fraud have been traced to, but not in Britain.
BROWDER: It’s remarkable and I can’t quite explain why it is that
the law enforcement authorities here refuse to open criminal cases, but they do - and what
that does is it puts a big welcome sign right out for every bad guy in the world to come in and
set up their operations, money laundering operations here, and so Britain has now, from what
I can tell, become the money laundering hub of the world.
WHEWELL: So what does the man now effectively in charge of
Britain’s fight against dirty money - Donald Toon, Head of the Economic Crime Command at
the National Crime Agency - think of that? How worried is he, in particular, by the role of
corporate service providers?
TOON: The short answer is, very worried. Trust and company
service providers, company formation agents, those professions cause us real concern. The
skills in those areas are essential to the type of money laundering we’re talking about. It
doesn’t take 1% or anything like that of people in those businesses to be problematic to cause
the UK a real problem. So are we worried? Yes. Are we focusing effort on this? Yes. And
we’re doing quite a lot of work with colleagues in HMRC, for example, to identify the
problematic and high risk company service providers and seek to take action against them.
WHEWELL: But in a situation where even you, as a police
authority, have difficulty working out what’s at the end of these chains. How can you expect
a simple company service provider sitting alone in an office without these kind of skills even
conscientiously to know they’ve got to the end of the chain and therefore provide the right
answer?
TOON: You can expect them to take reasonable steps. I’m not
sure I would recognise the simple company service provider working alone, as exactly
- 20 -
TOON cont: representative of the industry. The vast majority of
companies tend not to be created through that sort of mechanism.
WHEWELL: But we, for example, have been to a former council
house, just a simple flat in Edinburgh, where there’s four hundred companies registered. I
mean, that really is a single company service provider, or maybe there’s two of them, you
know, sitting on their own in the front room of a flat, creating companies. Are they going to
find out who the beneficial owner is?
TOON: If they aren’t, if they aren’t, then they are exposing
themselves to problems. That is an issue for, absolutely for the regulator. Frankly, I don’t
think the system works as effectively as it should. I think the regulatory landscape is
cluttered. There is a need to develop a much more consistent approach to reporting across the
different sectors. I think that there are issues about the way the suspicious activity reporting
regime currently operates.
WHEWELL: Suspicious activity reports, or SARs, are supposed to
be filed to his agency by anyone in the financial sector - banks, lawyers, estate agents, as well
as corporate service providers - if they think there’s anything fishy about a client.
TOON: What worries me, we got over 350,000 SARs into the
UK financial intelligence unit in the last reporting year. A very, very small proportion of
those came from company service providers. 177 out of 354,000, or 0.05% if you want to do
the arithmetic. What worries me is partly that we are identifying casework around company
structures where clearly the persons responsible for the formation of the company have
questions to answer, about their due diligence and their lack of reporting at the very least.
The regime itself, as I said, has difficulties within it. We’ve certainly been engaged with
Home Office and with others about potential changes to that regime, but ultimately that is a
matter for Home Office/Government to decide. The ultimate risk from a UK perspective, of
course, is our international reputation.
WHEWELL: Whitehall officials are now discussing tightening the
due diligence requirements for corporate service providers - another sign that the Government
- 21 -
WHEWELL cont: is now taking the threat of money laundering more
seriously. Donald Toon says he’s very concerned about what File on 4 has discovered.
ACTUALITY OF PROTEST IN MOLDOVA
WHEWELL: But what of Moldova? Donald Toon won’t discuss
that - though I understand that Britain has received a request for help from the authorities
there. But what’s still a largely unknown scandal here is tearing Moldova apart - thousands
of campaigners now occupying a central square week after week, demanding the return of
their billion. No-one knows where the money is now; almost certainly in neither Britain nor
Latvia. But Britain’s part in the story gives investigator Richard Smith no rest.
You stay up late night after night going through these kinds of records, looking at registration
document after registration document, compiling analyses. What drives you to do all this?
It’s very, very exhausting work. What drives you?
SMITH: Well, I think it’s the sheer, it’s the size of the
consequences, really. You go from a duff registration form in Companies House. At the other
end of it you’ve got, you know, a massive uproar in Moldova, where they haven’t got a very
vigorous economy and it’s just been wrecked by this bank fraud, and it’s all because we’re
just so sloppy about how we allow these things to be created and I just think that’s wrong. In
the end, the Moldovans are out a billion bucks. It makes me very angry.
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