A sweeping investigation into a £12.5 billion money laundering operation has put the spotlight on 19 different businesses in the United Kingdom that may have been used as fronts in the scheme.
The investigative report by the newspaper The Independent and non-profit Organised Crime and Corruption Reporting Project (OCCRP) detailed what it called one of the largest money laundering operations in Europe.
The report published last week said the U.K. companies were used as fronts to help launder nearly $20 billion in dirty money from Russia. The complex scheme involved ghost companies, set up by legitimate agents in the U.K., which would then borrow money from each other or make phony contracts for services. The money launderers would use guarantors from Russia and the former Soviet republic of Moldova. One of the fake companies would then take the other to court in the more lax judicial system of Moldova claiming default or other issues, and emerge with court-ordered payments from the Russian guarantor, allowing illegal proceeds to appear “clean,” the report said. The proceeds would then be deposited in Moldinconbank in Moldova and then transferred to another bank in Latvia. Moldinconbank officials denied any wrongdoing.
“This money was routed from Russia, but the companies incorporated in Britain were instrumental to transit the funds,” Vasile Sarco, an investigating officer from Moldova, told The Independent. The paper said the operation apparently ran for four years before authorities in Moldova shut it down in May.
The British companies had addresses in London, Birmingham, Belfast, Glasgow, Edinburgh, but the true owners were obscured by a web of “brass-plate entities” and nominee directors in known tax havens like the Seychelles, the Independent reported. One of the Edinburgh-based companies lists shareholders as two different companies in Panama and Belize, the report found. The newspaper said corporate laws in the U.K. shielding the true owners of companies have made the U.K. a popular destination for money launderers, and pointed to suspicions of similar schemes here involving organized crime groups from South America, the Middle East, and Asia.
The U.K. is working on plans to require disclosure of beneficial owners of companies, as is the European Union. The global Financial Action Task Force (FATF) also had the issue on the agenda for its meeting this week.
“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,” David Clarke, former head of the Fraud Squad and now head of translation compliance and multi-lingual due-diligence at Today Advisory Services an operational arm of Today Translations now and a private consultant, told The Independent.
The report did not name all of the 19 U.K. companies, and stressed that the formation agents were not accused of breaking the law. Some of the companies listed post office boxes as addresses, while three of the 19 listed a Birmingham office building that is also listed by almost 1,300 other companies. One business named in the report was London-registered Valemont Properties. The Independent said the listed director, Damian James Calderbank, is likely a nominee director who lent his name to the company and could be unaware of the company’s activities. The newspaper reported it reviewed Calderbank’s filings, which it said showed he holds 21 directorships in the U.K., has resigned from 333 more, and was a director for another 227 U.K. companies that have been dissolved. The newspaper reported a 2011 filing listed Calderbank as a shareholder, through a Gibraltar-based company, in the Moldovan bank used in the money laundering scheme. The Independent said Calderbank did not respond to requests for comment.
Sarco, the head of Moldova’s anti-money laundering unit, told the paper the judges in Moldova issued more than 50 court orders, amounting to £12.5 billion in payments. Some of the judges have resigned or are under investigation, and several bankers in Moldova also are under investigation, Sarco told the paper. He also said he informed the U.K.’s Serious Organised Crime Agency, now part of the National Crime Agency, of the scheme, but the agency declined comment.