hp sauce

Shells for Russia
Money laundering , Issue 1618

HOW go the UK's attempts to crack down on international money laundering, notably dodgy Russian money post the invasion of Ukraine? Not brilliantly, to judge by a recent session of the business and trade committee.

MPs heard that more than one in five of the limited partnerships registered in England, Wales and Northern Ireland in the past six years is actually fronted by a small number of nominee partners connected to, ahem, Alpha Consulting, a Russian-owned corporate services provider in the Seychelles. So much for cracking down on the Kremlin and its associates.

As committee chair Liam Byrne put it last week, with understatement: "That doesn't sound like an organisation we should be particularly relaxed about."

Shenanigans!
The revelation came in November from an inquiry by investigations outfit Finance Uncovered, the BBC and the Seychelles Broadcasting Corporation. They found the sort of financial shenanigans that should have been addressed by a part of the new Economic Crime and Corporate Transparency Act (ECCT), billed by the government as "the biggest upgrade in 170 years" to Companies House.

Four days after Russia's February 2022 invasion, ministers had promised that the ECCT, then making its way through parliament, would include "reforms to bear down on the use of limited partnerships as vehicles for facilitating international money laundering (including illicit Russian finance)".

These types of shell companies had become the money laundering legal entity of choice after clampdowns on limited liability partnerships (LLPs), themselves owned by offshore shell companies from the British Virgin Islands to the Seychelles.

These had become the go-to vehicle for getting illicit money out of the ex-Soviet region and were exposed back in 2013 by the Eye (see Where There's Muck There's Brass Plates at www.private-eye.co.uk/special-reports).

Significant loopholes
In 2016, new laws required companies including LLPs to publish their beneficial owners, or "persons of significant control" (PSCs).

Publicity-shy Russian crooks noticed the rules did not apply to Scottish limited partnerships (SLPs), which surged in popularity until the government extended the disclosure requirement to SLPs a year later. This in turn triggered a move to English limited partnerships, to which the disclosure obligations still didn't apply.

Not surprisingly, journalists have been uncovering dodgy dealings linked to this last opaque variant: suspected Ponzi schemes, procurement corruption scandals, shipwrecked oil tankers and sanctions- busting oligarch art deals, to name but a few.

Talk about Kevin
In November 2022, a cross-party group of MPs proposed extending the disclosure rules to cover all limited partnerships as part of the ECCT bill. Business minister Kevin Hollinrake, of Post Office fame, rejected the move. Limited partnerships outside Scotland could not have hidden "owners" because they lacked the necessary "legal personality".

This claim was blown apart by November's investigation but, responding to committee chair Byrne's concern about a Russian-owned outfit in the Seychelles registering so many LPs in England, Hollinrake still defended his earlier view on English limited partnerships.

He added: "Of course, we take an iterative approach to this. If there are changes we need to make then we will change them." No time to lose.

To read all these stories in full, please buy issue 1618 of Private Eye - you can subscribe here and have the magazine delivered to your home every fortnight.

Next issue on sale: 13th March 2024
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