Some £80bn laundered through UK shell companies
Hundreds of UK shell companies, half of which are registered to just eight addresses, are at the heart of £80bn in cases of corruption, a group campaigning for global financial transparency has found.
In the media feeding-frenzy that has accompanied the Paradise Papers, attention has been focused on offshore jurisdictions. But as reported in International Investment, a Jersey-based lawyer, while calling for the island to diversify away from financial services, pointed out that there is a “lot of hypocrisy because the biggest repositories of dirty money are really places like London and parts of the United States, which has its own tax havens in places like Delaware”.
Transparency International is a non-governmental organisation that campaigns against corruption and seeks to expose it.
Its latest report, Hiding in Plain Sight, found hundreds of UK registered shell companies at the heart of corruption cases totalling billions of pounds; “At the same time,” it said, “the UK’s system to prevent this abuse is failing.”
The research identified 766 companies registered in the UK that, Transparency said, “have been directly involved in laundering stolen money out of at least 13 countries”.
These companies were effectively shell companies operating as “layers to hide money that would otherwise appear suspicious”.
Being UK-based, as opposed to offshore, meant that they offered those using them illicitly “the added advantage of providing a respectability uniquely associated with being registered in the UK”.
The way that the system works is similar to cases unearthed at Mossack Fonseca and Appleby, the offshore law firms at the centre of the Panama Papers and the Paradise Papers, as revealed by the International Consortium of Investigative Journalists (ICIJ).
In the UK, ICIJ is represented by The Guardian and the BBC.
The UK is home to a network of Trust and Companies Service Providers (TCSP’s) who create these companies on behalf of their clients, such as the Manx leasing company created by Appleby on behalf of Lewis Hamilton, pictured above, to lease a private jet out to its only client – Lewis Hamilton.
There is no suggestion that Hamilton acted unlawfully, having sought professional advice and having acted upon that advice.
But the legality of the structure that was used has been called into question.
The UK-based TCSPs will register these ‘shell’ companies to UK addresses, “often nothing more than mailboxes”, says Transparency.
In fact, TCSP’s can set up companies in the UK even if they are not registered or based here, says Transparency. “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,” the organisation points out.