Billions of dollars have flowed into Europe through lightly regulated UK companies with bank accounts in the Baltic region, the Guardian can reveal.
More than 1,000 limited liability partnerships (LLPs) incorporated at the UK company registry handled transactions totalling an estimated $13bn (£9.9bn). Most of the money flowed into the companies via Lithuania’s now defunct Ukio bank.
Some of the LLPs whose names appeared in the leak were legitimate businesses, including UK law firms. But many were registered by offshore corporate service agents, allowing the real owners to hide behind several layers of secrecy, and the vast majority have now been dissolved.
The details come from one of the largest ever leaks of banking data – 1.3m transactions involving 238,000 account holders, most of them shell companies that were customers of different Baltic banks, principally Ukio, which was closed by regulators in 2013.
The leak is called the Troika Laundromat, because more than 70 of the offshore shell companies involved were operated by staff at an independent arm of the Russian investment bank Troika Dialog.
The data highlights the ease with which the origins of money can be disguised, along with the identities of people who are the beneficial owners of the companies involved.
LLPs were introduced in 2001 to allow companies that worked as partnerships to ringfence their business dealings from their personal finances. Unlike limited companies, LLPs do not pay corporation tax. Instead, partners are taxed individually.
Though they have legitimate uses, they are also favoured by criminals because they are quick and easy to set up, and do not require an auditor to sign off the accounts. The fact that they are in the UK lends credibility, particularly when opening bank accounts.
The data shows UK-registered LLPs were a vehicle of choice for those customers seeking to move money through Ukio while remaining under the radar.
Most of these were not connected to Troika or its clients.
Money spun around inside the Lithuanian banks, between different LLPs, and between different accounts owned by the same entity. The $13bn figure – which represents all payments into accounts – is likely to include the same money counted several times, due to the circular nature of many transactions.
Rachel Davies Teka, the head of advocacy for the campaign group Transparency International UK, said: “These revelations shed more light on how central UK shell companies have been to the movement of potentially suspicious wealth around the world.
“By combining a veneer of legitimacy with secretive ownership, they have channelled tens of billions of pounds in potentially illicit funds out of countries like Russia and through European banks with few questions asked.”
Concern over the use of LLPs recently led the the government to introduce new rules obliging companies to list details of any “person with significant control” over the business. But no agency is responsible for verifying the information before it appears on the companies register, Companies House.
Many LLPs submitted accounts to Companies House that did not match their activity at Ukio. Some claimed to be dormant even though their accounts were being used to transfer vast sums, often between each other.
For instance, Roberta Transit LLP,never filed accounts at Companies House after it was set up in 2007. A year later, the agents who acted as members applied for it to be struck off.
The application stated the LLP had not traded or carried on business in the previous three months. However, the data shows its bank accounts handled $36m worth of transactions over that period, and $139m in the three months after the strike off application.
Stranger Agency LLP was another Ukio customer, dissolved in 2014 and not linked to Troika. It filed identical accounts each year, telling Companies House it was “dormant throughout the current year and previous year”. However the data shows it made payments totalling €421m during the same period.
The anti-corruption campaigner Bill Browder said the lack of scrutiny of UK LLPs was outrageous.
“The person in charge should bear some kind of responsibility for this scandal that is happening under their noses,” he said.
A Companies House spokesperson said: “We work closely with law enforcement partners to tackle abuse of the register and all forms of economic crime by assisting their investigations. This can lead to prosecutions.”
While some countries have restrictions on who can form a company, in the UK they can be set up by people overseas and by unregistered providers, with no need for any official sign-off. Companies must be registered with Companies House, but this costs £12 and can be done in a matter of hours.
Companies House comes under the umbrella of the Department for Business, Energy and Industrial Strategy, whose secretary of state is Greg Clark. The registry, headed by Louise Smyth, has no statutory powers to verify the accuracy of information it is given, but can take action against those found to be breaking the rules.
Davies Teka said: “Whilst UK companies are now required to disclose who really controls them, making it more difficult to hide this kind of activity, this system remains open to abuse.
“There are currently no restrictions on who can incorporate British firms, making it easy for criminals to access them, and Companies House lacks powers to check the accuracy of information it receives. It is vital that this system is reformed to help end the UK’s reputation as an enabler of global corruption.”
