AT YOUR SERVICE

Investigating how UK businesses and

institutions help corrupt individuals and regimes
launder their money and reputations.
Transparency International is the world’s leading non-governmental anti-corruption
organisation. With more than 100 chapters worldwide, Transparency International has
extensive global expertise and understanding of corruption.

Transparency International UK (TI-UK) is the UK chapter of Transparency International.

We raise awareness about corruption; advocate legal and regulatory reform at
national and international levels; design practical tools for institutions, individuals
and companies wishing to combat corruption; and act as a leading centre of anti-
corruption expertise in the UK.

Acknowledgements: We would like to thank the Open Society Policy Center for their generous financial
support that made the research possible.

We are grateful to Tom Keatinge, Helena Wood, Richard Brooks, Nick Lord, Paul Heywood, Laurence
Cockcroft, as well as other members of the project’s advisory group for providing robust and incisive challenge.

We would also like to thank OCCRP, Dedupe.io, Johnny Hammill and Will O’Connor for their assistance with
the most challenging parts of this research.

Editor: Steve Goodrich (TI-UK)

Researchers: Ben Cowdock (TI-UK) and Gabriele Simeone (TI-UK)

© 2019 Transparency International UK. All rights reserved. Reproduction in whole or in parts is permitted,
providing that full credit is given to Transparency International UK (TI-UK) and provided that any such
reproduction, in whole or in parts, is not sold or incorporated in works that are sold. Written permission must
be sought from Transparency International UK if any such reproduction would adapt or modify the original
content.

Published 24 October 2019

Every effort has been made to verify the accuracy of the information contained in this report. All information
was believed to be correct as of October 2019. Nevertheless, Transparency International UK cannot accept
responsibility for the consequences of its use for other purposes or in other contexts. This report reflects TI-
UK’s opinion. It should not be taken to represent the views of those quoted unless specifically stated.

Transparency International UK’s registered charity number is 1112842.

AT YOUR SERVICE
Investigating how UK businesses and
institutions help corrupt individuals
and regimes launder their money and
reputations.
D At Your Service

CORRUPTION CASE
STUDY HEATMAP 1

2–4
The findings in this report are based on data collected
from over 400 cases of high-end corruption and
associated money laundering in which UK service 5 – 10
providers were involved. These cases involve at
least £325 billion worth of funds diverted by rigged
11 – 30
procurement, bribery, embezzlement and the unlawful
acquisition of state assets, taking place in 116 countries
31– 49
across the world. This map shows the key geographical
connections to these cases. The bigger and redder 50+the
country, the more cases there are with this jurisdiction
as a nexus. At a glance, this shows where UK service CANADA
providers have been involved in some of the most
egregious cases of corruption in our time.

Key

1
USA
2–4

5 – 10

11 – 30 MEXICO HAITI
DOMINICAN REPUBLIC
GUATEMALA JAMAICA ANTIGUA AND BARBUDA
31– 49 HONDURAS
NICARAGUA
TRINIDAD AND TOBAGO
50+ COSTA RICA
PANAMA VENEZUELA
COLUMBIA
CANADA
ECUADOR

PERU BRAZIL PO
UK
GERMAN
BOLIVIA
FRANCE AUSTR
SWITZER
CR
MONTEN
USA CHILE SPAIN ITALY
M
TUNISIA
ARGENTINA MOROCCO

MEXICO LI
HAITI
DOMINICAN REPUBLIC
GUATEMALA JAMAICA ANTIGUA AND BARBUDA MALI
SENEGAL

NI
HONDURAS
GAMBIA
NICARAGUA
COSTA RICA TRINIDAD AND TOBAGO GUINEA BENIN
SIERRA LEONE
PANAMA VENEZUELA LIBERIA IVORY COAST
COLUMBIA CAME
EQUITORIAL GU
ECUADOR GABON
PERU BRAZIL
ANG
BOLIVIA

CHILE
 Transparency International UK E

LATVIA
RUSSIA
UKRAINE
LITHUANIA

POLAND
UK
GERMANY KAZAKHSTAN
MOLDOVA
FRANCE AUSTRIA HUNGARY
SWITZERLAND ROMANIA UZBEKISTAN
AZERBAIJAN
CHINA
CROATIA
MONTENEGRO
SERBIA GEORGIA
BULGARIA ARMENIA
SPAIN ITALY TURKEY TURKMENISTAN TAJIKISTAN SOUTH KOREA
GREECE SYRIA
MALTA LEBANON IRAN
IRAQ
MOROCCO TUNISIA
KUWAIT PAKISTAN
LIBYA EGYPT BAHRAIN
BANGLADESH TAIWAN
SAUDI QATAR UAE HONG KONG
ARABIA INDIA MYANMAR MACAO
MALI
CHAD SUDAN
THAILAND
SENEGAL VIETNAM

NIGERIA
YEMEN
GAMBIA
GUINEA PHILIPPINES
SIERRA LEONE BENIN
LIBERIA IVORY COAST
CAMEROON BRUNEI
UGANDA MALASIA
EQUITORIAL GUINEA
GABON RUPUBLIC RWANDA
KENYA SINGAPORE
OF CONGO BURUNDI
TANZANIA INDONESIA
MALAWI
ANGOLA ZAMBIA MOZAMBIQUE
ZIMBABWE
BOTSWANA

SOUTH AFRICA
1 At Your Service

EXECUTIVE SUMMARY
The UK has a big problem with dirty money. The list of of corruption, from the funds being obtained, to their
exposés detailing the investments and indulgences of movement around the global financial system, and their
a global cadre of corrupt individuals in or through our defence in British courts and the press.
economy has become too large to ignore. Although this
is deeply worrying, it is increasingly acknowledged within Although most of the organisations and individuals
policy circles and business, which is a positive step we identified in our inquiry are subject to some form
towards taking meaningful action. of regulation and scrutiny by UK authorities, many we
identified are not. These require particular consideration
Much of the media attention to date has been on by Government given they often play a key role in either
the palatial properties obtained by kleptocrats and growing or defending the ill-gotten gains of their clients or
oligarchs with funds of questionable origins. This is both benefactors.
understandable and welcome given the UK’s international
obligations to identify, investigate and, where possible, Given the complexity and nuance involved in each type
seize and return the corrupt funds used to purchase of enabling activity it is impracticable to outline all of the
these opulent abodes. However, if Government and law issues identified and specific prescriptions within this
enforcement agencies are going to make meaningful report. Similarly, in order to make this inquiry manageable
progress towards ending the UK’s role as a safe haven we have not attempted to pass judgement on how our
for corrupt wealth, they need to understand and prevent findings reflect on these service providers as a whole.
these funds being obtained and moved to the UK in the Unquestioningly, there are numerous professionals
first place. who are highly dedicated and active in the fight against
corruption. For example, many lawyers and law firms have
In December 2018, we laid bare how 1,201 opaque been extremely supportive of Transparency International
companies in the UK’s Overseas Territories had been used (TI). This has helped TI take kleptocrats to court, provide
to inflict over £250 billion in economic damage through legal advice for victims of corruption throughout the world,
corruption over the past few decades alone. It is no longer shape international conventions and formulate policy that
news that the anonymity provided by these jurisdictions has often led to important legislation.
and their laws contributes towards economic crime. Yet,
it is with the rare exception of leaks like the Panama and What we have done, though, is seek to shine a light on
Paradise Papers that the lawyers, accountants and other where things have gone wrong, and invite the reader
service providers who incorporate and administer these to reflect on what could be done to avoid this from
conduits of crime are thrown into the spotlight. happening again in the future. Based on this inquiry and
our accumulated experience, we think there are three key
Similarly, that London property is an attractive investment areas where change is needed to help end the UK’s role
class for corrupt foreign officials looking to hide the as a facilitator of global corruption:
proceeds of embezzlement and bribery is not a revelation.
Though save for the occasional documentary like From 1. Transparency: corruption likes shadows, we need
Russia With Cash or crime dramas such as McMafia, it further corporate transparency reforms to ensure no
is unusual for those facilitating these transactions to be place to hide for criminals abusing companies in the
thrust into public view. Now, through forensic analysis of UK and its offshore financial centres.
over 400 cases and interviews with almost 50 experts
and academics in this field, we can reveal in more detail 2. Ethics and engagement: we cannot rely on rules
than ever before the services provided to those who have alone to spur good practice, we need businesses
abused power entrusted in them for private gain. and institutions to say what they can do to ensure
there is no-one to help those involved in corruption.
The scale of this task has been immense, with one senior
law enforcement officer describing it as akin to examining 3. Oversight and enforcement: rogue agents and poor
‘the whole history of corruption’. Peppered throughout practice cannot be solved with goodwill alone, there
most major cases of bribery, embezzlement and rigged needs to be effective oversight of business and a
procurement you will find a UK nexus: a secretive credible deterrent against wrongdoing to stop the
company in the British Virgin Islands, a Mayfair Mansion, UK’s dirty money problem.
a British bank. We have sought to examine how these
individuals and institutions have played a role in some of We have outlined 10 recommendations for change below
the biggest abuses of entrusted power for private gain in for how these can be implemented in practice.
recent times. The result is a guide through the lifecycle
 Transparency International UK 2

RECOMMENDATIONS
Transparency Luxury property

Offshore companies The UK’s property market is a prime destination for corrupt
individuals and other criminals to launder their stolen
There is a clear correlation between corruption cases and wealth (see our reports Corruption on Your Doorstep4
the use of the secretive corporate vehicles based in the and Faulty Towers5). Using anonymous shell companies
UK’s Overseas Territories and Crown Dependencies (see registered overseas, these individuals can purchase luxury
our report The Cost of Secrecy).1 Transparency about the property in the UK with the proceeds of their crimes and
beneficial owners of these companies is an important part away from the prying eyes of businesses, politicians, law
of the solution to tackling the laundering of corrupt and enforcement and the wider public. This enables them to
illicit funds. enjoy their ill-gotten gains with impunity, and use much
needed housing as their own personal safety-deposit box.
The UK Government is required by law to provide
assistance to the Overseas Territories in making this The Government’s bill for a publicly accessible register
transition to public registers of beneficial ownership. In of the true owners of overseas companies that buy
October 2019, the Government of the Cayman Islands or own UK property is a vital piece of anti-corruption
committed to introducing a public beneficial ownership legislation, and should be made law at the earliest possible
register by 2023; however, key jurisdictions, like the British opportunity. This would make it easier for the private
Virgin Islands (BVI), are yet to do the same.2 sector to identify suspicious transactions and money
laundering risk in the property market.
In June 2019, the Crown Dependencies committed jointly
to voluntarily introduce central public registers of beneficial Recommendation 2: Introduce transparency over overseas
ownership for companies based in their jurisdictions within companies holding UK property
12 months of an EU review into their implementation
across Member States.3 However, the commitment is Government should introduce the Registration of Overseas
unclear about when specifically these registers will be Entities Bill before Parliament at the earliest possible
made available to the public. opportunity.

Recommendation 1: Support public corporate

transparency of company ownership in the UK’s offshore UK companies
financial centres
UK companies regularly feature in corruption and
Government should set out public and time-bound plans associated money laundering cases (see our reports
for providing assistance to the Overseas Territories to Offshore in the UK and Hiding in Plain Sight).6 This is
enable them to establish public registers of beneficial because of the UK’s hitherto laissez-faire approach to
ownership. The Government should also seek clarity from company incorporation. Companies House does not
officials in the Crown Dependencies about their proposed currently have adequate resources or powers to sufficiently
timeline for implementing public beneficial ownership monitor and ensure the integrity of the company register.
registers. This allows corrupt individuals and their agents to
abuse UK companies for criminal purposes, and inhibits
businesses’ ability to identify and report suspicious activity
to law enforcement.

1 Transparency International UK, The cost of secrecy: The role played by companies registered in the UK’s Overseas Territories in money laundering and corruption (December 2018) https://
www.transparency.org.uk/publications/cost-of-secrecy/
2 http://www.gov.ky/portal/page/portal/cighome/pressroom/archive/201909/Statement%20on%20Beneficial%20Ownership [Accessed 11 October 2019]
3 Joint commitment by Guernsey, Jersey and the Isle of Man, Registers of beneficial ownership of companies (June 2019) https://www.gov.gg/CHttpHandler.ashx?id=119716&p=0
4 Transparency International UK, Corruption on your doorstep: How corrupt capital is used to buy property in the UK (February 2015) https://www.transparency.org.uk/publications/corruption-on-
your-doorstep/
5 Transparency International UK, Faulty towers: Understanding the impact of overseas corruption on the London property market (March 2017) https://www.transparency.org.uk/publications/
faulty-towers-understanding-the-impact-of-overseas-corruption-on-the-london-property-market/
6 Transparency International UK, Offshore in the UK: Analysing the use of Scottish Limited Partnerships in corruption and money laundering (June 2017) https://www.transparency.org.uk/
publications/offshore-in-the-uk/ and Transparency International UK, Hiding in plain sight: How UK companies are used to launder corrupt wealth (November 2017) https://www.transparency.org.
uk/publications/hiding-in-plain-sight/
3 At Your Service

Government has recognised the need for reform and has Donations
consulted on ‘proposals to enhance the role of Companies
House, increase the transparency of UK corporate entities There is growing evidence that numerous institutions
and help combat economic crime.’7 and organisations have accepted donations from corrupt
individuals seeking to burnish their reputations and
This should reduce the risk of UK legal entities being hide past crimes. Some of these – such as universities,
used in corruption and money laundering, and increase independent schools and art galleries – claim to have
businesses’ confidence in the accuracy of the UK’s robust due diligence processes in place when accepting
corporate register. large contributions from philanthropists and benefactors;
however, more could be done to develop and support the
Recommendation 3: Empower Companies House to implementation of good practice standards when it comes
increase the accuracy and reliability of the UK corporate to handling donations.
register
Recommendation 5: Help cultural and educational
Government should empower Companies House to institutions make informed and consistent judgements
identify and report suspicious activity, and provide it with about handling the donations they receive
the resources to develop a more thorough approach to
rooting out inaccurate or false information on the UK Government and the Charity Commission should
company register. work with sectoral bodies – such as Universities UK,
Independent Schools Association, and the Museums
Association – and businesses to develop good practice
Ethics and engagement guidance for handling donations. This should include:

Ethical principles • principles to guide decisions

In a competitive market environment, there are an • processes to provide clarity and consistency
array of pressures that can push businesses towards
taking undue risks and on-boarding unsavoury clients. • prohibited donations to define what form or source
Some areas, like the legal profession, have to balance of contribution will not be accepted
competing obligations – including responsibilities to the
court, the public interest and ensuring access to justice • publication of donors (subject to legitimate privacy or
– as well as financial demands. Others, like banks, may security concerns)
have millions of pounds at stake in a single transaction.
Businesses are supposed to have policies, assessment Unregulated services
processes and procedures in place to help inform some
of these decisions; however, these risk becoming a tick- A lack of awareness of money laundering risk amongst
box exercise without ethical principles to guide them those offering unregulated services, like schools and
and they do not cover activities that fall beyond the universities, legal advice and construction has provided
scope of regulation. This can result in the protection of, an opening for corrupt individuals to make use of their
and impunity for, powerful corrupt individuals with deep services without challenge. In the absence of an obvious
pockets. response to suspicious activity by these organisations,
journalists and activists are left to expose those who have
Recommendation 4: Businesses to apply ethical principles accepted suspect funds, which damages the reputation of
to guide their engagement with high-risk customers the institutions involved.

Businesses should adopt and publish ethical principles Conversely, we have seen how un-regulated firms have
that inform how they implement their on-boarding policies, the potential to work with those in the regulated sector to
processes and procedures regarding high-risk customers; help law enforcement pursue suspicious wealth in the UK
for example, if a law firm wants to take on a client accused economy. We also note that Home Office and the JMLIT
of grand corruption on an ‘access to justice’ basis, it could are exploring how to engage un-regulated businesses in
decide only to do so at legal aid rates.8 activities where there is evidence of exposure to corrupt
funds.

7 https://www.gov.uk/government/consultations/corporate-transparency-and-register-reform [Accessed 10 September 2019]

8 For a draft legal definition of grand corruption see http://files.transparency.org/content/download/2033/13144/file/GrandCorruption_LegalDefinition.pdf [Accessed 10 September 2019]
 Transparency International UK 4

Recommendation 6: Extend money laundering threat defences against corrupt funds (see our report Don’t
assessments to key unregulated sectors Look, Won’t Find).10 There are 25 different supervisors
responsible this task, with 14 different supervisors for the
The National Crime Agency’s (NCA) National Assessment accountancy sector alone. Most of them fail to meet basic
Centre should extend its threat assessments to cover standards of good governance and effective supervision,
key unregulated businesses and institutions, such as with many riven by conflicts of interest and lacking the
those outlined in this report. The improved understanding powers or sanctions to provide a meaningful deterrent
derived from these assessments should be used to against bad practice. This system needs a radical
support these sectors in playing a greater role in detecting overhaul.
corrupt wealth; for example, through advice and guidance
on identifying suspected money laundering or the Recommendation 8: Radically overhaul the UK’s AML
proceeds of corruption. supervisory regime

Government should accelerate its reform the AML

Oversight and enforcement supervisory system over the next 12 months by:

Corporate liability • strengthening the ability of supervisors to provide

a credible deterrent by ensuring they all have the
There is a weak liability regime for money laundering necessary powers, sanctions, resources, and
failings in the UK at a corporate level (see Corruption transparency arrangements in place
Watch’s report The Corporate Crime Gap).9 Currently,
it is nearly impossible to bring a successful criminal • protecting the independence of AML oversight
prosecution against large and complex businesses and removing conflicts of interest by ensuring
who have facilitated what is sometimes industrial scale professional body supervisors are institutionally
money laundering. In the absence of the threat of criminal separate from their promotional and commercial
conviction and the stigma it provides, big multinationals activities
effectively operate above the law and may consider
regulatory action against them as the cost of doing • removing weaknesses in the AML supervisory regime
business. by stripping duties from bodies failing to comply
with the principles of effective and proportionate
Recommendation 7: Reform the UK’s corporate liability supervision
laws
• ensuring police and supervisors pursue egregious
Government should bring legislation before Parliament at breaches of the MLR 2017 through criminal
the earliest opportunity to introduce a ‘failure to prevent prosecution
economic crime’ offence, akin to Section 7 of the Bribery
Act 2010. This would help create a more credible deterrent
against weak money laundering defences in large and Personal liability
complex businesses.
Under the Senior Managers Regime (SMR) for the financial
Government should also task the Law Commission with sector, senior members of staff are responsible for
carrying out a 12-month review on the wider corporate maintaining their bank’s systems and controls, including
liability framework to identify how major corporate bodies those intended to prevent money laundering, even if they
can be held to account for substantive money laundering are not directly involved in the day-to-day management of
offences without needing to prove the existence of a these functions. In theory, this provides a greater incentive
‘controlling mind’ at board level. The results of this review for senior managers to take responsibility for the effective
should be introduced as draft legislation within six months management of money laundering risks. Currently, this
of the Law Commission reporting its findings. system only operates within the financial sector. Pending
evidence from its implementation and reform of the wider
AML supervisory framework, there could be a case for
Anti-money laundering (AML) supervision extending this regime into non-financial sectors, too.

A disjointed approach to supervising businesses’

compliance with the Money Laundering Regulations
(MLRs) has left many private sector firms with weak

9 Corruption Watch UK, The corporate crime gap: How the UK lags behind the US in policing corporate financial crime (March 2019) https://www.cw-uk.org/corporatecrimegap
10 Transparency International UK, Don’t look, won’t find: Weaknesses in the supervision of the UK’s anti-money laundering rules (November 2015) https://www.transparency.org.uk/publications/
dont-look-wont-find-weaknesses-in-the-supervision-of-the-uks-anti-money-laundering-rules/
5 At Your Service

Recommendation 9: Consider extending the Senior

Managers Regime beyond the financial sector

HM Treasury should review evidence from the

implementation of the SMR and consider extending
this approach to non-financial sectors. The SMR has
the potential to introduce personal accountability, and
therefore a greater deterrent, against individual money
laundering failings. This would need to be considered
in the wider context of AML supervisory reform and the
capacity of the relevant supervisors to monitor and enforce
these rules effectively.

Resourcing Law Enforcement

A lack of adequate resources for law enforcement

agencies undermines the effectiveness of the UK’s
response to corruption and associated money laundering.
The financial intelligence unit (FIU), which sits within the
NCA and receives suspicious activity reports (SARs)
from the private sector, has suffered from understaffing
and an outdated IT system. In its recent review of the
UK’s money laundering defences, the Financial Action
Task Force (FATF) – an international standards body –
expressed ‘serious concern’ about these deficiencies,
especially considering it raised similar issues with the
UK over a decade ago.11 Reform of the SARs system,
including a new IT system and additional analytical
capabilities, is included in the Government’s Economic
Crime Plan. However, there are also broader concerns
about law enforcement’s ability to attract, train and retain
staff capable of successfully investigating and prosecuting
complex corruption and money laundering cases.

The skills and expertise of staff in this area are also in

demand by large businesses who can offer much more
attractive remuneration packages than the public sector.
Given the competition for this resource, it is crucial that
law enforcement agencies can provide a competitive
package for prospective and existing staff.

Recommendation 10: Adequately resource law

enforcement agencies to investigate and pursue
corruption and associated money laundering

The Government and law enforcement agencies should

carry out and implement a joint review of the human
resources and funding needed to establish and maintain
and effective law enforcement response to corruption and
money laundering.

11 FATF, Mutual evaluation review: United Kingdom (December 2018) p.6 https://www.fatf-gafi.org/media/fatf/documents/reports/mer4/MER-United-Kingdom-2018.pdf
 Transparency International UK 6

INTRODUCTION
The UK is a hub for corrupt wealth from around the whilst repressive regimes that maintain their power
world. This money is acquired with the aid of companies through abusing public office feel emboldened by
incorporated in the UK and in its offshore financial their impunity to commission hostile acts on British
centres, invested into luxury property here, and used soil.13
to buy access to prestigious institutions and privileged
lifestyles. Although the exact scale of dirty money Understanding how the UK contributes to these ills is
entering the UK is difficult to quantify, the National Crime a critical first step in trying to cure them. Currently HM
Agency (NCA) estimates over £100 billion in illicit funds Treasury’s periodic national risk assessments for money
impacts on our economy each year.12 A substantial laundering and the NCA’s strategic assessments of
amount of this is obtained by those who have abused serious and organised crime provide high-level overviews
power entrusted in them for private gain. of this. However, they provide summaries that may leave
the reader guessing what is really happening on the
The cost of this is threefold: ground. This report seeks to build on these documents by
providing vivid insights into the frontline of financial crime in
1. It damages the UK’s global reputation as a beacon of the UK and its offshore financial centres.
good governance and a defender of the rule of law.
Laying claim to these titles rings hollow when you Whilst an accurate estimate of the total scale of enabling
are turning a blind eye to repressive kleptocrats who activity is desirable, the methodological challenges
make their home on your soil with impunity. this presents make the task almost impossible – how
can anyone know the totality of what happens, often
2. It contributes towards the continued impoverishment behind closed doors and away from the prying eyes of
of people throughout the world, many of whom the authorities and the media. Instead, we have sought
the UK Government aims to support through aid. to provide illustrations of the problem at hand through
Poor governance stymies the development of local investigative data collection techniques and real life case
markets, hinders opportunity and can undermine studies.
the provision of basic public services, such as
healthcare, education, water and sanitation. To do this we have examined the role played by a wide
range of service providers based here in the UK and in its
3. Allowing it to go unchecked presents a national offshore financial centres in the Overseas Territories and
security risk we cannot ignore. Corruption overseas Crown Dependencies. These individuals and organisations
can undermine the strength of a country’s armed work predominantly in the financial and business service
forces and its ability to tackle terrorist insurgencies, sector, which according to the latest available data

12 https://nationalcrimeagency.gov.uk/news/national-economic-crime-centre-leads-push-to-identify-money-laundering-activity [Accessed 26 June 2019]

13 HM Government, United Kingdom anti-corruption strategy 2017-2022 (December 2017) pp.14-15 https://assets.publishing.service.gov.uk/government/uploads/system/uploads/
attachment_data/file/667221/6_3323_Anti-Corruption_Strategy_WEB.pdf
7 At Your Service

account for around half of the UK’s service exports.14 Where possible we have used data to assess the nature of
involvement, identifying:
The sector is recognised globally as being at a higher
risk of exposure to corruption and associated money • individuals responsible for signing off accounts for
laundering due to the nature of its work. Consequently, companies involved in corruption and associated
the likes of bankers, lawyers, accountants, and trust money laundering
and company service providers (TCSPs) are subject
to strict regulations and are supposed to form the first • firms conveyancing property transactions involving
line of defence against flows of dirty money. However, unexplained and suspicious wealth
Government has admitted that until recently not enough
was known about how these businesses were at risk • those responsible for incorporating networks of shell
of involvement in serious financial crime.15 Many more companies for industrial-scale money laundering
organisations – such as independent schools, universities schemes, and UK businesses receiving funds of
and charities – are not subject to the same rules and unknown provenance from them
oversight, yet we have found them to be targets of those
looking to commit, cash in on or cover-up corrupt activity. Due to the type of activity under investigation, there is
a dearth of hard data for analysis. Where data were not
Through our research for this report, we have sought to available, we have produced case studies to show real-
shed more light on the nature of this problem and provided life examples of how corrupt individuals have sought the
10 headline recommendations on how to ensure the UK assistance of UK service providers.
provides:
Historically, distinct professions – such as the finance, legal
No place to hide: The ultimate owners of companies and accountancy industries – have framed Government’s
incorporated in the UK and its offshore financial centres approach to assessing money laundering risk. However,
should be reported accurately and open to public scrutiny we agree with the Royal United Services Institute’s (RUSI)
to make it more difficult for corrupt individuals to use them assessment, made in its report on intelligence gaps in the
to obtain and move illicit funds. UK’s anti-money laundering (AML) regime, which proposes
a more activity-focused approach.16 Based on our
No one to help: There should be little incentive for UK appraisal of the evidence, this provides much more insight
professionals or service providers to willingly ‘enable’ than defining risks and areas of concern in terms of what
corrupt individuals and regimes to obtain illicit wealth, are often very diverse and overlapping industries.
launder their money, or burnish their reputations.
We have presented the findings of our research in five
No impunity: There should be greater levels of sanction, main sections:
including asset seizures and criminal convictions, against
corrupt individuals who seek to use the UK as a safe 1. Context: an overview of the background to this
haven. research

To gain further insight into why and how this problem 2. Research process: an overview of how we
occurs, we have analysed more than 400 global corruption conducted our inquiry
cases in which UK service providers were involved. These
cases involve at least £325 billion worth of funds diverted 3. Key findings: a summary of what we found to be
by rigged procurement, bribery, embezzlement and the the range of enabling activity and the nature of
unlawful acquisition of state assets, taking place in 116 involvement by UK service providers
countries across the world (see Map). Using open-source
information – investigations by journalists, public company 4. Enabling activities: a review of key forms of enabling
registers, the Land Registry and data from leaks like the activity, including examples of high-risk activity and
Panama Papers – we have mapped key cases, in which analysis of the available evidence
582 firms and individuals have been involved at some
point, offering services in the UK or its offshore financial 5. Conclusions: what we learnt from our research
centres.

14 Department for International Trade, UK trade in numbers (February 2019) p.11 https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/
file/791972/190402_UK_Trade_in_Numbers_full_web_version.pdf
15 HM Treasury and Home Office, National risk assessment of money laundering and terrorist financing 2017 (October 2017) pp.5-6 https://assets.publishing.service.gov.uk/government/
uploads/system/uploads/attachment_data/file/655198/National_risk_assessment_of_money_laundering_and_terrorist_financing_2017_pdf_web.pdf
16 RUSI, Known unknowns: Plugging the UK’s intelligence gaps on money laundering involving professional services providers (April 2018) pp.5-7 https://rusi.org/sites/default/files/20180409_
known_unknowns_final.pdf
 Transparency International UK 8

CONTEXT
Before examining high-risk and enabling activity in more • stable property market
detail, it is useful to understand these services in their
wider context. They are not provided in isolation, rather • world class education
they form part of a complex interplay between global
market forces, Government policy initiatives, regulatory • large and varied services sector
incentives and cross-border business relationships. We
have provided a summary of these below. • connection to offshore financial centres in its
Overseas Territories and Crown Dependencies
When assessing the risk associated with each activity, it
is worth considering how this wider context could inform The sheer volume of activity taking place through these
the scale of the threat and the strength of the mitigation in markets makes it inevitable that the services sector here is
place. For example, we know from previous research that exposed to corrupt individuals and their illicit wealth.
UK companies have been used to facilitate large-scale
money laundering.17 There are currently very few effective
measures in place to prevent this, and anyone, anywhere Legal framework
in the world, can set up a UK company within minutes for
just £12. There is also a disjointed approach to policing To help tackle the proceeds of corruption being laundered
the company formation process, which means rogue through the UK, Britain’s domestic legislation and
agents can operate with relative impunity. Government has regulations implement the high-level commitments,
recognised this vulnerability and is seeking to implement recommendations and requirements from three principal
radical reforms to Companies House to help protect international initiatives:
against this abuse of UK legal entities for illicit purposes.18
However, until these changes are implemented effectively 1. UN Convention Against Corruption (UNCAC)
and the system for policing such activities in the UK is
overhauled, this continues to be a high money laundering A UN convention with 186 state parties as of June 2018,
risk with a large potential impact. which describes itself as ‘the only legally binding universal
anti-corruption instrument’.20 The UNCAC defines different
We note that not all of the impact highlighted in this report forms of corruption, such as bribery and embezzlement,
can be attributed to a clear monetary value. The silencing and covers five key areas:
of journalists and those seeking to expose corruption goes
far beyond the financial cost of the original crime – free • preventive measures
speech is at stake. Similarly, when UK parliamentarians
accept expensive holidays from a repressive foreign • criminalization and law enforcement
regime in return for advocating on their behalf, the integrity
of our democratic institutions is on the line.19 Responding • international cooperation
to these challenges defines who we are as a country, and
affects our ability to claim leadership on global initiatives. • asset recovery

• technical assistance and information exchange

The UK as a global financial centre
State parties to UNCAC are subject to peer reviews to
The UK is an attractive destination for corrupt individuals assist their effective implementation of the convention
for the same reasons as it is for legitimate business: (known as the Implementation Review Mechanism).21 An
executive summary of the UK’s last review was published
• strong rule of law in May 2019.22

17 Transparency International UK, Hiding in plain sight: How UK companies are used to launder corrupt wealth (November 2017) https://www.transparency.org.uk/publications/hiding-in-plain-
sight/
18 https://www.gov.uk/government/consultations/corporate-transparency-and-register-reform [Accessed 3 September 2019]
19 https://publications.parliament.uk/pa/cm201719/cmselect/cmstandards/1397/139702.htm [Accessed 3 September 2019]
20 https://www.unodc.org/unodc/en/corruption/uncac.html [Accessed 11 September 2019]
21 https://www.unodc.org/unodc/en/corruption/implementation-review-mechanism.html [Accessed 8 October 2019]
22 Implementation Review Group, Review of implementation of the United Nations Convention Against Corruption (May 2019) https://assets.publishing.service.gov.uk/government/uploads/
system/uploads/attachment_data/file/802272/Executive_Summary_of_the_United_Kingdom_-_Review_cycle_2__Chapter_II_and_V_.pdf
9 At Your Service

The UNCAC’s chapter on preventive measures provides identify suspected corrupt wealth, including:
a high-level commitment to much of what is covered
by the following recommendations, directives and legal • know your customer (KYC) screening (such as
requirements. obtaining beneficial ownership information and
undertaking due diligence checks)
2. Financial Action Task Force (FATF)
• record-keeping requirements
An international standard-setting body who has provided
more specific recommendations ‘to promote effective • maintaining and following policies and procedures to
implementation of legal, regulatory and operational drive compliance with these rules26
measures’ to tackle money laundering.23 Participating
countries are subjected to routine mutual evaluations, Breaches of the MLRs can be subject to either civil
which examine technical compliance with these proposals. penalties27 imposed by the relevant AML supervisor or
The UK’s last mutual evaluation review was published in criminal prosecution.
December 2018.24
6. Financial Services and Markets Act 2000
3. EU Money Laundering Directives (MLDs) (FSMA)
EU legislation requiring Member States to transpose high This law governs the financial sector. It was amended
level requirements into their domestic context. The UK in 2013 and 2016 to introduce and then extend new
has committed to implement the fifth money laundering rules about the responsibilities and accountability of
directive (5MLD) even though it plans to leave the EU senior officials within banks, commonly known as the
before its implementation date.25 Senior Managers Regime (SMR). Where a bank breaches
either POCA or the MLRs, senior managers within the
These international commitments, recommendations organisation can be held responsible for failing to maintain
and directives are reflected in the following UK laws and adequate systems and controls (SYSC). The Financial
regulations: Conduct Authority (FCA) – the regulator for financial
services – can impose civil penalties in relation to AML
4. Proceeds of Crime Act 2002 (POCA) breaches under the SMR.

This defines a number of substantive money laundering

offences, including: Policy initiatives
• concealing, disguising, converting and removing Government and law enforcement agencies have launched
criminal funds numerous initiatives to address the role of UK service
providers in money laundering, including:
• failing to report suspicious activity to the UK’s
Financial Intelligence Unit (FIU), which is based in the • the creation of a National Economic Crime Centre
NCA (NECC)28

• tipping-off a suspect about a police investigation • draft legislation that, when implemented, will shine
a light on the real owners of UK property owned via
Breaches of POCA can be subject to criminal prosecution. overseas companies – currently a money laundering
risk – and deter their use for hiding corrupt wealth
5. Money Laundering Regulations 2017 (MLR
2017) • a ‘flag it up’ campaign to promote awareness within
the regulated community of their legal obligation to
This transposes the EU MLDs into domestic law and sets report suspicious activity to the UK’s FIU29
out basic requirements for ‘regulated businesses’ to help

23 FATF, International standards on combating money laundering and the financing of terrorism & proliferation (June 2019) http://www.fatf-gafi.org/media/fatf/documents/recommendations/
pdfs/FATF%20Recommendations%202012.pdf
24 FATF, United Kingdom: Mutual evaluation report (December 2018) http://www.fatf-gafi.org/media/fatf/documents/reports/mer4/MER-United-Kingdom-2018.pdf
25 https://eur-lex.europa.eu/legal-content/EN/TXT/?uri=CELEX%3A32018L0843 [Accessed 8 October 2019]
26 See Annex I for the full list of public sector and professional body AML supervisors in the UK.
27 Including monetary penalties and prohibitions on management.
28 http://www.nationalcrimeagency.gov.uk/news/1257-national-economic-crime-centre-announced [Accessed 26 June 2019]
29 https://flagitup.campaign.gov.uk/ [Accessed 26 June 2019]
 Transparency International UK 10

• a consultation on reform of Companies House and approach, including:40

how UK legal entities are incorporated, managed
and controlled30 • inconsistencies in the quality of supervision across
different bodies, leaving many firms without effective
In January 2019, Government also established an oversight
Economic Crime Strategic Board (ECSB), comprised
of public and private sector bodies, to oversee its • real conflicts of interest amongst supervisors
economic crime policy.31 The economic crime plan this who also act as trade bodies for their industry,
board produced laid out 52 actions for tackling money undermining the independence of their enforcement
laundering.32 activity

• insufficient and opaque civil sanctions, providing little

Business initiatives deterrent against future AML failings; fines issued by
HM Revenue and Customs (HMRC) and professional
Alongside Government and law enforcement’s response, body supervisors, in particular, are so low as to not
there are an array of initiatives seeking to promote good be considered effective
anti-corruption and AML practices within the business
community. Some of these involve working with policy These deficiencies inevitably have an impact on the quality
makers, civil society and law enforcement agencies, of compliance within regulated businesses.
including the B20, the B-Team,33 the Joint Money
Laundering Intelligence Taskforce (JMLIT),34 TI-UK’s
Business Integrity Forum,35 TI’s Professional Supporters Lack of a credible deterrent
network,36 Professionals Against Corruption.37
Whilst criminal money laundering offences relating to the
conduct of enablers are reserved for the most egregious
Key issues behaviour, these sanctions remain under-enforced, with
evidence showing these crimes occur on a regular basis.
Inadequate system for AML supervision This contributes to the lack of a credible deterrent against
wrongdoing in this area.
There are 25 different supervisors tasked with ensuring
firms adhere to the MLRs. Through a combination of There have been no prosecutions of firms or individuals
advice and guidance, and audit and enforcement action, failing to comply with the MLRs 2017, whilst between
these supervisors should provide a strong incentive 2013 and 2018 there were just 15 prosecutions for failing
structure for regulated businesses to maintain high to comply with their predecessor, the MLRs 2007. In
standards and effective controls against dirty money. April 2019, Mark Steward (FCA Director of Enforcement)
However, our previous research has found this system is indicated the FCA would open ‘dual track’ investigations
not fit for purpose.38 into firms, which may result in criminal or civil proceedings
for MLR breaches.41 HM Treasury is due to conduct a
Both civil society and, more recently, the Office for review of these regulations by 2022.42
Professional Body AML Supervision (OPBAS) – a
standards body established in 2018 to oversee non-public There are also significant deficiencies in the UK’s
body AML supervisors, including some that ‘double-hat’ corporate liability laws, which mean it is incredibly difficult
as both AML supervisors and representative bodies for to successfully prosecute a large multi-national for the
their industry39 – have identified numerous flaws in this substantive offence of money laundering or bribery.

30 https://www.gov.uk/government/consultations/corporate-transparency-and-register-reform [Accessed 10 October 2019]

31 https://www.gov.uk/government/publications/economic-crime-strategic-board-minutes-and-agenda-january-2019 [Accessed 11 October 2019]
32 HM Government and UK Finance, Economic crime plan 2019-2022 (July 2019) https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/
file/816215/2019-22_Economic_Crime_Plan.pdf
33 http://www.bteam.org/ [Accessed 11 September 2019]
34 https://nationalcrimeagency.gov.uk/what-we-do/national-economic-crime-centre [Accessed 11 September 2019]
35 https://www.transparency.org.uk/our-work/business-integrity/business-integrity-forum/ [Accessed 11 September 2019]
36 https://www.tipsnetwork.org/ [Accessed 11 September 2019]
37 https://www.ibe.org.uk/professionals-against-corruption-pac/152/54 [Accessed 11 September 2019]
38 Transparency International UK, Don’t look, won’t find: Weaknesses in the supervision of the UK’s anti-money laundering rules (November 2015) https://www.transparency.org.uk/publications/
dont-look-wont-find-weaknesses-in-the-supervision-of-the-uks-anti-money-laundering-rules/
39 The Solicitors Regulation Authority (SRA) is the only professional body AML supervisor that is institutionally separate from the lobbying arm of its regulated community.
40 OPBAS, Themes from the 2018 OPBAS anti-money laundering supervisory assessments (2019) https://www.fca.org.uk/publication/opbas/themes-2018-opbas-anti-money-laundering-
supervisory-assessments.pdf
41 https://www.fca.org.uk/news/speeches/partly-contested-cases-pipeline-and-aml-investigations [Accessed 11 September 2019]
42 HM Government and UK Finance, Economic crime plan 2019-2022 p.20
11 At Your Service

Corruption Watch UK found that British authorities are However, there has been one noticeable development in
yet to bring a successful corporate criminal prosecution the financial sector.
against a UK bank for money laundering.43 US authorities
have brought criminal enforcement actions against seven In 2016 the FCA introduced the SMR, which holds
different banks. those in senior management positions responsible for
a firm’s business functions and activities, making them
In 2016, Alun Milford, the General Counsel of the Serious accountable should money laundering breaches occur.50
Fraud Office (SFO), suggested the failure to bring criminal An FCA survey of the effects of the regime found it had
sanctions against large firms like banks was due to the contributed to a change in the financial sector’s behaviour,
UK’s corporate liability law.44 This requires prosecutors whilst acknowledging this was difficult to measure.51 Holes
to identify a ‘controlling mind’ at board level in large still remain in the regime, though; individuals found to have
and complex organisations to secure a prosecution breached the rules remain able to move to other firms with
against businesses for egregious wrongdoing. The Law no consequences.52
Commission has also identified this ‘identification doctrine’
as a major issue that needs review.45 Outside the financial profession there are no such
equivalent regimes. This reduces the likelihood that
The Bribery Act 2010 dealt with this issue in part by individuals will be held accountable for money laundering
introducing a ‘failure to prevent’ offence,46 in which a failings and reduces incentives for cultural and behavioural
company could be held criminally liable for not stopping change towards taking money laundering seriously.
bribery within its organisation unless it had taken adequate
measures to prevent this from happening. Since then, In sum, there is not a strong enough civil regulatory or
a failure to prevent tax evasion offence was introduced criminal prosecutorial response to deter those seeking to
by the Criminal Finances Act 2017.47 A similar approach profit from facilitating corrupt activity.
should be applied to a failure to prevent money laundering
offence, although the unsatisfactory situation regarding the
identification doctrine also needs resolving. Patchy domestic AML compliance

At the 2016 anti-corruption summit in London, As a consequence of poor supervisory support and
Government committed to consulting on reforming the inadequate deterrent against careless or wilful non-
UK’s corporate liability laws.48 However, this still has compliance with the law, there is patchy compliance with
not happened and was notably absent from its recent the UK’s AML rules. Regulated businesses – such as
economic crime plan. Given this omission – and the banks, lawyers, accountants, estate agents, TCSPs and
composition of the ECSB, which includes many who could those dealing in high-value goods, like jewellery and luxury
be subject to any tougher laws on corporate crime and yachts – are supposed to have systems in place to detect
no independent representation from civil society or smaller corrupt wealth and report it to the police. Some have well-
businesses – the governance of the board has been developed compliance and financial intelligence functions,
questioned. In particular, there are concerns as to whether and are actively working with law enforcement agencies to
it has the procedures in place to prevent vested interests help identify and pursue suspect wealth. However, across
from capturing the economic crime policy agenda.49 the regulated community, there is an inconsistent record in
addressing the threat of suspicious funds. In 2019 alone:
Individuals in the private sector are subject to varying
levels of personal liability for money laundering failings. • A review of 59 firms by the Solicitors Regulation
In theory, individuals can be sanctioned by their AML Authority (SRA) – an AML supervisor for part of the
supervisor for breaches of the MLRs, including monetary legal sector – resulted in just under half being subject
penalties and censure. However, given the issues noted to disciplinary proceedings for insufficient AML
above about the effectiveness of most AML supervision, procedures.53
the amount of enforcement action being taken by many
supervisors does not match the likely scale of breaches. • Almost 50 per cent of businesses subject to a
43 Corruption Watch UK, The corporate crime gap: How the UK lags behind the US in policing corporate financial crime (March 2019) https://www.cw-uk.org/corporatecrimegap
44 https://www.sfo.gov.uk/2016/09/06/control-liability-good-idea-work-practice/ [Accessed 27 August 2019]
45 Law Commission, Criminal liability in regulatory contexts (June 2015) p.106 http://www.lawcom.gov.uk/app/uploads/2015/06/cp195_Criminal_Liability_consultation.pdf
46 Bribery Act 2010, Section 7 https://www.legislation.gov.uk/ukpga/2010/23/crossheading/failure-of-commercial-organisations-to-prevent-bribery
47 Criminal Finances Act 2017, Part 3 http://www.legislation.gov.uk/ukpga/2017/22/part/3/enacted
48 https://www.transparency.org.uk/press-releases/action-uk-government-gaps-economic-crime/ [Accessed 28 August 2019]
49 https://www.independent.co.uk/news/business/news/banks-money-laundering-hsbc-rbs-barclays-financial-crime-a9004841.html [Accessed 28 August 2019]
50 https://www.fca.org.uk/firms/senior-managers-certification-regime/banking [Accessed 29 August 2019]
51 https://www.fca.org.uk/publications/multi-firm-reviews/senior-managers-and-certification-regime-banking-stocktake-report [Accessed 10 September 2019]
52 https://uk.reuters.com/article/uk-britain-banks-regulator/uk-watchdog-says-rolling-bad-apple-bankers-still-an-issue-idUKKCN1UV19C [Accessed 10 September 2019]
53 https://www.sra.org.uk/sra/news/press/aml-tcsp-review-2019 [Accessed 28 August 2019]
 Transparency International UK 12

RESEARCH PROCESS
money laundering compliance review by HMRC – the
AML supervisor for a range of activities, from estate
agency to company formation and the sale of high
value goods – were found to be ‘non-compliant’.54 The purpose of our research was to gain a better
understanding of the breadth of services used by corrupt
• An FCA study of 19 firms found some remained individuals to obtain, move and defend their illicit wealth.
unaware of money laundering risk through capital To explore this question, we triangulated evidence from
markets.55 three principal sources:

These deficient AML systems represent a major Literature review: We conducted a scoping review,
vulnerability in efforts to prevent dirty money entering the using external outreach, key word searches and our
UK. accumulated knowledge of the subject area to identify
relevant publications from a range of sources including
academia, law enforcement, civil society organisations
Dependency on other jurisdictions news and media organisations, Government, international
organisations, and AML supervisory bodies.58
The UK is also vulnerable to firms based overseas and
offering services in the UK. Under the MLR 2017, these Expert opinion: We consulted just under 50 experts from
businesses are not required to be overseen by a UK academia, law enforcement, civil society, the private
AML supervisor, making the effectiveness of the system sector, journalism and Government with experience of
dependent on the quality of supervision in overseas detecting, investigating, researching and developing
jurisdictions.56 Unfortunately, the standard of civil regulation policy responses to corruption and associated money
in these countries have fared no better than in Britain, and laundering.
in many cases is significantly worse.
Data collection: We collected and analysed over 400
Global standards for AML supervision have been shown cases of high-level corruption and associated money
to be weak. Of 73 countries assessed by the FATF, just laundering over the last 30 years covering 116 countries of
nine were found to have substantially effective systems origin.
of supervision.57 Only two jurisdictions achieved a
substantially effective rating when assessed for how Our sample of cases covers allegations at a range of
private sector firms prevented and reported money stages, from prima facie evidence of corruption through
laundering. This is particularly worrying considering that to successful prosecution. Given that detection and
FATF assesses countries based on a minimum standard, prosecution rates of corruption are widely accepted to be
which sets a very low bar for jurisdictions to meet. low, the figures contained in this report are likely to be the
tip of the iceberg.
Poor implementation of AML laws globally presents a
major external threat to the UK’s defences against dirty
money.

54 HM Treasury, Anti-money laundering and counter-terrorist financing: supervision report 2017-18 (July 2019) https://assets.publishing.service.gov.uk/government/uploads/system/uploads/
attachment_data/file/823551/Supervision_report_2017-2018_final_08072019.pdf
55 FCA, Understanding the money laundering risks in the capital markets: Thematic review TR19/4 (June 2019) https://www.fca.org.uk/publication/thematic-reviews/tr19-004.pdf
56 http://www.legislation.gov.uk/uksi/2017/692/made [Accessed 26 June 2019}
57 http://www.fatf-gafi.org/publications/mutualevaluations/documents/assessment-ratings.html [Accessed 26 June 2019]
58 See our bibliography for a full list: https://www.transparency.org.uk/atyourservicebibliography
13 At Your Service

KEY FINDINGS
Range of activity
From a review of the cases and related data we collected, £325 billion. These are funds diverted or misused through
we have been able to provide an illustrative picture rigged procurement, bribery, embezzlement and the
of the range of UK businesses providing services to unlawful acquisition of state assets.
very high-risk clients. Although this does not present a
definitive view of the UK’s total exposure, considering During the initial scoping phase of this project, we
only a fraction of corruption cases are ever detected and identified data points in our case repository that we could
exposed, the actual figures are a likely to be substantially explore in more detail to illustrate the nature of enabling
higher. activity within the confines of the time and resources we
had available. From the 400+ cases, we used data points
It is difficult to determine the direct, total amount of to identify 582 firms and individuals offering services in
economic damage caused in these cases; however, we the UK, including:
think it is reasonable to estimate that it could exceed

86
Banks and financial
81
Law firms
62
Accountancy firms
institutions including all of the Big Four

Whether unwittingly or otherwise, these businesses helped acquire the following

assets and entities used to obtain, move and defend corrupt or suspicious wealth:

2,225 Companies 17,000+ Companies 421 Properties 7 Luxury Jets 3 Luxury Yachts
incorporated in the more companies in the UK worth more worth around £170 worth around £237
UK, its Overseas incorporated in the than £5 billion million million
Territories and Crown UK that we have
Dependencies reasonable grounds
directly involved in to suspect have
making payments facilitated similar
activity

We also identified the following businesses giving corrupt individuals the opportunity to
spend their illicit wealth on luxury lifestyles and private education for their children.

118 177
luxury goods and services Schools and other
firms educational institutions
 Transparency International UK 14

Nature of involvement
Whilst it is beyond doubt that UK service providers are are varying degrees of entanglement defined by the facts
routinely exposed to suspicious funds, the nature and of each case. Whilst all the facts are not always known,
extent of their assistance to corrupt individuals varies. we consider there to be indicators to suggest where on
From an appraisal of the evidence, we have summarised this scale an individual or organisation lies in relation
this as a spectrum of involvement, acknowledging that to a case (for example, the extent to which AML checks
some may have become involved through no fault of were carried out, or the personal relationship between the
their own whilst others appear to have chosen to cater service provider and the corrupt individual).
exclusively to criminals. Between these two extremes

Active compliance Unwitting Wilfully blind Corrupted Complicit

Procedures are involvement Avoids and/or High-risk clients Knowingly involved
followed, red flags Checks fail to does not carry out targeted as part of in facilitating
are identified and identify clear red checks. business model. predicate
acted on. flags, for example, corruption and/or
due to deception money laundering
by the client. offence.

Varying levels of involvement can exist within which are not under legal obligations to conduct
organisations; for example, wilful blindness at a senior level background checks on their clients or benefactors.
can allow complicit actors further down the management Nonetheless, we hope these broad categories can help
hierarchy to actively assist criminals in cleaning their catalyse thinking about responding to the kinds of activity
corrupt wealth. In some cases, entire firms are owned we catalogue in this report.
by individuals involved in corrupt activity, with enablers
available to perform no-questions-asked services for the Understanding where supervised firms and individuals
owner. For example, an Al-Jazeera investigation found fall on this spectrum should help inform proportionate
that Pavel Fuchs – a Ukrainian businessman under responses:
investigation for his role in ‘assisting the unidentified
persons of a criminal organisation’ related to the £1 billion • Those found to be knowingly facilitating corruption
stolen by Viktor Yanukovych59 – owns a global company and associated money laundering should face
formation firm with a UK office, called ‘the Chesterfield criminal prosecution, business-ending fines and/or
Group’.60 debarment from offering services in future.

We recognise that this is probably an imperfect summary, • Firms with inadequate systems in place to detect
and that it is possible to include additional gradations suspicious activity should face fines and other civil
to capture the nuances of specific cases. For example, sanctions, with follow-up monitoring from their AML
there is a substantive difference between a well-equipped supervisor to ensure improvements.
compliance department with substantial expertise, which is
highly capable of spotting and reporting suspicious activity, • In cases where no clear red flags were found at the
and an under-resourced and inexperienced one that is time, supervisors should identify how this behaviour
content to go through the motions without fulfilling their could be spotted in the future; for example, by
intended purpose. We also acknowledge that this does providing advice and guidance to staff.
not map easily onto unregulated businesses or institutions,

59 https://www.aljazeera.com/news/2018/07/oligarch-named-al-jazeera-investigation-faces-questioning-180730132437308.html [Accessed 26 June 2019]

60 https://www.aljazeera.com/indepth/features/oligarch-friend-trump-pavel-fuchs-171217151538382.html [Accessed 26 June 2019]
15 At Your Service

ENABLING ACTIVITIES
Corrupt individuals face three key hurdles to enjoying the • banking transactions
benefits of their activity: • company formation and maintenance
• property transactions
1. First they must obtain corrupt wealth – for example, • high value goods
through soliciting bribes, rigging procurement, • lifestyle management
embezzling funds or unlawfully acquiring state assets • education
– without being caught. • legal defence
• influence
2. Then they need to distance themselves from the • high-profile investments
proceeds of these crimes by moving these funds,
either to alternative bank accounts and companies The following sections outline in more detail how UK
or by investing them in assets such as property. service providers have facilitated corruption and/or
associated money laundering, or have engaged in activity
3. Finally, they must defend their corrupt wealth, that presents a high risk of doing so.
via either the UK legal system or cleaning their
reputations and integrating themselves into the UK’s Much of this constitutes regulated activity and is carried
elite. out by firms that are legally obliged to have AML
procedures in place to help identify and report suspicious
Our research has found UK individuals, organisations and activity to the authorities. However, we have also identified
services across a variety of regulated and unregulated a number of these activities that are not covered by
sectors playing roles in each of these stages. Our analysis the MLRs61 or POCA.62 This means firms offering such
has confirmed this remains an ongoing problem, with a services are not required to carry out due diligence on
wide range of actors continuing to offer services to very clients or their source of funds, or to report any suspicious
high-risk clients and corrupt individuals. activity to law enforcement agencies, despite being
exposed to money laundering risk.

How UK enablers help corrupt Whilst we do not propose those offering unregulated
services should take on full AML requirements, it is
individuals currently unclear how they are supposed to engage
with the UK’s more formal defences against corrupt
To understand where money laundering risks lie in the UK, wealth. At minimum, we think there are key institutions
and which individuals and organisations are exposed to and organisations worth engaging with more, both to
them, we have broken down this risk by areas of activity. build a more comprehensive picture of this threat and to
As observed by RUSI, examining enabling activities, rather understand what they could do to help strengthen the
than professions as a whole, allows for a fuller intelligence response.
picture, taking into account the interplay between the
services provided and opportunities for intervention. For example, intelligence could be solicited through an
Further, businesses within the same profession may awareness-raising campaign amongst the unregulated
undertake a range of different activities; for example, law service providers we have identified in this report. This
firms may offer some or all of the following services: could help inform those exposed to high-risk funds and
clients how to identify and report suspicious behaviour.
• shell company formation and management However, this may need to be piloted to assess these
• conveyancing organisations’ ability to provide meaningful and actionable
• litigation information. It may also be possible for regulated
• lobbying and public relations businesses – for example, banks providing services to
these organisations – to identify suspect clients without
Through our research, we have identified nine principal having to directly engage the unregulated client in the
areas of activity, some of which also contain a range of process.
sub-activities:

61 The Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017, Part 2, Chapter 1 http://www.legislation.gov.uk/uksi/2017/692/made
62 Proceeds of Crime Act 2002, Schedule 9, Part 1 http://www.legislation.gov.uk/ukpga/2002/29/schedule/9
 Transparency International UK 16

credible deterrent.66

Retail banking (personal and business)

Corrupt individuals and those laundering money are

frequently shown to have used UK bank accounts, in
their own names and those of companies they control,
to hold funds and pay for goods and services. Whilst
banks should carry out checks on their customers and
transactions related to them, this does not appear to
prevent many from denying corrupt individuals access to
Banking transactions these services.

The UK plays a key role as a global hub for financial Case study: Global ‘Laundromats’ and the UK banking
activity, with trillions of pounds passing through banking connection
institutions every year. These transactions take several
forms, including: Over the past five years, the Organised Crime and
Corruption Reporting Project (OCCRP) has published
• retail banking involving individuals and companies investigations based on leaked banking data, showing
the movement of hundreds of billions of pounds in
• correspondent banking, facilitating international fund criminal and suspicious funds from the FSU.67 These
transfers on behalf of local banks ‘Laundromats’ have helped reveal the role British banks
play as entry points into the UK economy.
• buying and selling of equity (including shares in
companies) and debt, for example government Often, these funds will be paid from secretive companies
bonds, which generate interest for the beneficiary with Baltic bank accounts to UK banks’ clients for goods
and services.
However, as exposed by recent money laundering
scandals, within these flows are billions of pounds of Whilst many of the clients of UK banks were legitimate
suspicious transactions linked to suspected corruption, businesses – ranging from luxury goods stores to travel
particularly in the former Soviet Union (FSU). This exposure agents – some were identified as politically exposed
is reflected in the number of reports banks make annually persons (PEPs)68 from high-corruption-risk jurisdictions.
to UK law enforcement agencies. Over 370,000 instances
of suspected money laundering were reported in 2017-18, We have conducted new analysis on all Laundromat data
making up 80 per cent of all SARs submitted by regulated related to UK bank accounts. Through this, we have found
businesses.63 that:

The FCA oversees more than 19,600 firms offering these • Clients at 72 UK banks and branches sent or
services. The FCA has strong statutory powers, and is received over £570 million in suspicious funds
well resourced compared to other regulators; however, between 2003 and 2017 with most of this activity
questions have been raised over its capacity to sufficiently occurring between 2005 and 2014.
scrutinise all the firms it oversees.64
• Clients at just 10 banks were responsible for sending
The FCA has imposed financial penalties of almost £350 and receiving more than 90 per cent of these funds.
million on 10 firms and £92,700 on four individuals since (see Table 1).
2012. It is also pursuing 19 investigations under the
SMR.65 Whilst financial sanctions against firms are large, In total, these transactions involved more than 3,100
FATF have noted that the FCA should increase the number British bank accounts; however almost one third of the
of sanctions, on both firms and individuals, to create a £575 million was paid into just five UK bank accounts.

63 NCA, Suspicious activity reports (SARs) annual report 2018 (2019) https://nationalcrimeagency.gov.uk/who-we-are/publications/256-2018-sars-annual-report/file
64 FATF, Mutual evaluation review: United Kingdom p.10
65 https://uk.reuters.com/article/uk-britain-banks-regulator/uk-watchdog-says-rolling-bad-apple-bankers-still-an-issue-idUKKCN1UV19C [Accessed 29 August 2019]
66 FATF, Mutual evaluation review: United Kingdom p.124
67 Organised Crime and Corruption Reporting Project (OCCRP), The Russian Laundromat (2014) https://www.occrp.org/en/laundromat/
OCCRP, The Azerbaijani Laundromat, (2017) https://www.occrp.org/en/azerbaijanilaundromat/
OCCRP, The Troika Laundromat, (2019) https://www.occrp.org/en/troikalaundromat/
68 PEPs are defined as an individual who is entrusted with prominent public functions, their family members or known close associates. They are recognised as presenting a high corruption and
money laundering risk because of the power they hold and the access they have to public funds.
17 At Your Service

Table 1: Laundromat funds sent or received by individuals Case study: Standard Chartered Bank
and organisations with UK bank accounts by financial
institution In April 2019, US70 and UK authorities71 fined Standard
Chartered Bank £842 million. The FCA found weak
Bank £ % due diligence and monitoring processes within its
correspondent banking services, which left it exposed to
Citibank 131,377,937 24.15 money laundering.
Royal Bank of Scotland 92,331,197 15.21
Between 2010 and 2013, Standard Chartered’s UK
J.P Morgan Chase Bank 76,749,994 12.44
correspondent bank executed 400,000 transactions,
HSBC 56,460,687 9.87 worth $213 billion, relating to customers originally taken
Barclays 52,963,588 9.41 on by its overseas branches with no additional due
diligence, despite these processes being deficient in these
Lloyds 41,218,594 7.06
institutions.72
Natwest 25,011,829 4.48
UBS 22,419,943 3.98 In 37 per cent of cases reviewed, Standard Chartered
had not taken adequate steps to identify whether a PEP
FIBI Bank 10,976,677 1.99
was involved in a transaction. Where PEPs were involved,
Bank of America 8,629,296 1.54 Standard Chartered failed to understand the nature of that
Other 57,121,028 9.87 involvement 42 per cent of the time. These failures were
particularly worrying because the bank was operating in
Total 575,260,769 100 high-risk jurisdictions, like Iran, Syria and Zimbabwe.73

This data relates purely to funds paid into or from UK Capital markets
accounts; many UK-based banks had clients who played
a much broader role in these schemes through their Financial institutions trading debt, bonds and stocks
branches around the world. in the UK appear to be vulnerable to abuse by money
launderers. Whilst the scale of illicit flows through these
In 2017, The Guardian highlighted how the UK- services is unknown due to the complex nature of these
headquartered HSBC had processed more than transactions, recent examples of these schemes have
£300 million through its global branches in relation to shown UK banks as well as those from across Europe to
the ‘Russian Laundromat’. When questioned about be at their heart.
Laundromat transactions, these banks insisted they had
strict AML measures in place.69 In a recent thematic study of this activity, the FCA found
that whilst there was emerging awareness within this
industry about money laundering risks and some good
Correspondent banking practice for identifying and responding to it, there were
also instances of bad practice. For example, some of
Correspondent banking – the practice of a financial those they engaged ‘were not clear on their obligations’74
institution providing an intermediary service on behalf of for reporting suspicious activity to law enforcement, and
other banks – is an essential link in the global economy. others ‘had not assessed the risks posed by money
UK banks offering these services are not directly in contact laundering to their business at all’.75 Tensions also existed
with the origin or destination of the funds, making them within firms between those seeking clients and compliance
reliant on the AML systems of other banks involved in officers, with some seeing diligent on-boarding processes
the transaction. UK banks offering these services should as potentially undermining their competitiveness.76
therefore be confident that the other financial institutions
involved in these transactions have sufficient processes in
place to detect and prevent money laundering.

69 https://www.theguardian.com/world/2017/mar/20/british-banks-handled-vast-sums-of-laundered-russian-money [Accessed 30 July 2019]

70 https://www.justice.gov/opa/pr/standard-chartered-bank-admits-illegally-processing-transactions-violation-iranian-sanctions [Accessed 9 July 2019]
71 https://www.fca.org.uk/news/press-releases/fca-fines-standard-chartered-bank-102-2-million-poor-aml-controls [Accessed 9 July 2019]
72 FCA, Decision notice: Standard Chartered Bank (February 2019) p.14 https://www.fca.org.uk/publication/decision-notices/standard-chartered-bank-2019.pdf
73 FCA, Decision notice: Standard Chartered Bank p.13
74 FCA, Understanding the money laundering risks in the capital markets p.4
75 FCA, Understanding the money laundering risks in the capital markets p.7
76 FCA, Understanding the money laundering risks in the capital markets p.16
 Transparency International UK 18

Case study: Deutsche Bank they are required to take into consideration an entity’s
compliance with laws and regulations in local jurisdictions,
In January 2017, the FCA fined Deutsche bank £163 specifically those under which non-compliance could
million for money laundering failings, which took place result in fines or litigation.84 Therefore, auditors cannot
between 2011 and 2015, relating to ‘mirror trades’ be blind to red flags, and they do have a duty to identify
between its Moscow and London branches.77 This entailed and report any activity that could result in the institution
a Russian corporate entity buying Russian securities, becoming bankrupt or incurring significant losses through
paying in roubles via the Moscow office, whilst a British fines.
Virgin Islands (BVI) firm sold the same amount of securities
for dollars via the London office.78 The same people With privileged access to financial information relating to
controlled the Russian entity and the BVI firm, which the major loans and flows of money, auditors have uncovered
FCA indicated was highly suggestive of financial crime.79 instances of financial crime. In 2009, BTA bank began
Trades like this happened every day for more than three proceedings against its former Chairman, Mukhtar
years, resulting in around $10 billion in suspicious funds Ablyazov, after an audit by PricewaterhouseCoopers
being moved out of Russia. (PwC) identified a £6.38 billion hole in its balance sheet.85

A number of traders and brokers in both the Moscow There are also cases in which the role of auditors has been
and London offices knew about the scheme but were not questioned. Our case analysis has identified 21 instances,
aware of the individuals whose money they were moving. involving more than £185 billion in suspicious loans and
The head of the Moscow equities desk, Tim Wiswell, transactions, where global financial institutions have gone
had greater involvement, and Deutsche Bank’s lawyer bankrupt or suffered significant losses due to corruption
alleged that he took payments in order to oversee the and associated money laundering. The local branches
mirror trades.80 The scheme could continue unchecked of six global auditing firms, including the Big Four, were
because of deficient KYC procedures at the bank and a auditing these 21 financial institutions. In some cases, the
lack of scrutiny of the transactions.81 This, combined with auditors involved have faced sanctions for their conduct.
individuals actively engaged in continuing the scheme, We have provided a selection of these cases below.
enabled billions of pounds in suspicious funds from Russia
to be ‘cleaned’. Malaysian authorities fined Deloitte £400,000 for failing
to report irregularities relating to the publicly-owned
As a result its investigation, the FCA issued its highest 1Malaysia Development Berhad (1MDB) investment fund,
ever fine. In the US, the New York Department of Financial which saw billions in state funds stolen by public officials
Services also fined the bank £339 million for this breach.82 and their associates.86 KPMG are also facing investigation
Deutsche Bank is under criminal investigation in the US for for their role in the scandal.87
potential money laundering breaches, but is not currently
facing similar action in the UK.83 EY was reported to the Danish Business Authority (DBA)
in relation to a 2014 audit of Danske Bank. Danske saw
almost £140 billion in suspicious funds flow through its
Audit in banking failure Estonian branch during an eight-year period from 2007
to 2015.88 The DBA has stated that EY failed to carry out
Auditors play a key role in ensuring financial institutions further investigation or flag suspicious activity to authorities
are governed properly and can be partners in the fight during its audit.89 EY has said it is cooperating with the
against money laundering and corruption. Detecting authorities.
corruption and money laundering are not the primary roles
of auditors; however, under international accounting rules In 2017, PwC was banned from formally auditing banks in

77 https://www.fca.org.uk/news/press-releases/fca-fines-deutsche-bank-163-million-anti-money-laundering-controls-failure [Accessed 9 July 2019]

78 https://www.newyorker.com/magazine/2016/08/29/deutsche-banks-10-billion-scandal [Accessed 26 June 2019]
79 FCA, Decision notice: Deutsche Bank (January 2017) p.2 https://www.fca.org.uk/publication/final-notices/deutsche-bank-2017.pdf
80 https://www.newyorker.com/magazine/2016/08/29/deutsche-banks-10-billion-scandal [Accessed 26 June 2019]
81 FCA, Decision notice: Deutsche Bank p.3
82 https://www.dfs.ny.gov/about/press/pr1701301.htm [Accessed 27 August 2019]
83 https://www.nytimes.com/2019/06/19/business/deutsche-bank-money-laundering-trump.html [Accessed 27 August 2019]
84 International Standard on Auditing (ISA) 250, Consideration of Laws and Regulations in an Audit of Financial Statements (December 2009) https://www.ifac.org/system/files/downloads/
a013-2010-iaasb-handbook-isa-250.pdf
85 https://www.hoganlovells.com/en/news/bta-bank-welcomes-judgment-for-breaking-privilege-in-ablyazov-fraud-case [Accessed 22 May 2019]
86 https://www.theguardian.com/business/2019/jan/30/deloitte-fined-by-malaysia-over-breach-linked-to-1mdb [Accessed 2 July 2019]
87 https://www.cityam.com/kpmg-and-deloitte-under-investigation-role-1mdb-corruption/ [Accessed 2 July 2019]
88 https://danskebank.com/-/media/danske-bank-com/file-cloud/2018/9/report-on-the-non-resident-portfolio-at-danske-banks-estonian-branch-.-la=en.pdf [Accessed 9 August 2019]
89 https://www.reuters.com/article/us-danske-bk-moneylaundering-ernst-young/danske-bank-auditor-ey-reported-to-fraud-squad-over-2014-report-idUSKCN1RO0X7 [Accessed 2 July 2019]
19 At Your Service

Ukraine after it failed to uncover the alleged embezzlement

of billions of pounds from Privatbank by its owners.90 This
resulted in the state having to bail out the bank at a public
cost of almost £4 billion. The owners deny these claims.91

Grant Thornton’s Moldovan franchise was criticised in

2015 for failing to identify the theft of more than £700
million from three of the country’s biggest banks – all of
whom it was auditing.92 This scandal resulted in the then
prime minister being jailed for his role in the scheme.93
Grant Thornton Moldova deny wrongdoing and stand by
the quality of their work in the audits.94

Rosexpertiza, the Russian branch of Crowe Horwarth,

were the auditors for Vneshprombank, which had its
licence revoked in 2016 due to a £2.18 billion hole in its
assets95 – some of which is believed to have been stolen
by senior managers at the bank.96

90 https://www.reuters.com/article/ukraine-privatbank/ukraine-bans-local-pwc-unit-from-auditing-banks-after-privatbank-insolvency-idUSL5N1KB783 [Accessed 12 August 2019]

91 https://www.occrp.org/en/investigations/oligarchs-weaponized-cyprus-eranch-of-ukraines-largest-bank-to-send-5-billion-abroad [Accessed 3 October 2019]
92 https://www.theguardian.com/world/2015/jul/01/global-auditor-moldova-wealth-franchise-grant-thornton-banks-embezzle [Accessed 2 July 2019]
93 https://www.rferl.org/a/moldova-former-prime-minister-filat-jailed-9-years/27823377.html [Accessed 30 July 2019]
94 https://www.theguardian.com/world/2015/jul/01/global-auditor-moldova-wealth-franchise-grant-thornton-banks-embezzle [Accessed 3 October 2019]
95 https://www.nornickel.com/files/en/gsm/agm2015/materials/Rosexpertiza-in-english.pdf [Accessed 2 July 2019]
96 https://www.ft.com/content/b4493730-5c7b-11e9-9dde-7aedca0a081a [Accessed 30 July 2019]
 Transparency International UK 20

levels of oversight and enforcement.

Individuals and businesses outside the UK are also able to

form British companies. Those who do this as a business
are subject to the regulations of the jurisdictions in which
they are based, which may be weakly enforced or not in
place at all. There is currently no regulation or oversight of
individuals incorporating UK legal entities directly through
Companies House. Both of these gaps represent major
vulnerabilities to money laundering.

Company formation and Company formation

maintenance
Forming a company in the UK itself is cheap and easy;
The UK, its Overseas Territories and Crown Dependencies whilst requirements have been brought in to increase
are hubs for company formation and management transparency regarding company ownership, criminals are
services, with criminals frequently using these jurisdictions still able to evade these and to control corporate vehicles
to: secretly. The UK Government is seeking to address this
and has issued a consultation that intends to introduce
• obtain resources by hiding conflicts of interest, substantive changes to how companies are formed and
enabling embezzlement and channelling bribes the data collected from them.97

• move corrupt wealth, often through complex In 2017, we found 766 UK companies used in 52
networks of companies, trusts and nominees corruption and money laundering scandals amounting to
more than £80 billion.98 We have continued to collect this
• invest corrupt wealth into luxury property, yachts, information, and have now identified 929 UK companies
jets and art involved in 89 cases of corruption and money laundering,
amounting to £137 billion in economic damage.
Whilst it is possible to form UK entities directly through
Companies House, money launderers often seek the Case study: TI-UK shell company analysis
assistance of those who provide additional services, like:
Our new analysis for this report suggests that Britain has
• submitting annual paperwork been home to tens of thousands of shell companies over
the past 10 years. Using Companies House data, we
• providing service addresses have identified 17,000 legal entities controlled by at least
one individual or company that acted as an officer for
• filing accounts Limited Liability Partnerships (LLPs) found to be involved in
economic crime.99 This is an ongoing problem; more than
• arranging bank accounts 5,400 of these shell companies remain active.

• nominee services Many of these entities are structured almost identically to

those used to facilitate corruption and suspicious financial
Those offering these services are required under the MLRs activity, indicating that it is likely the same TCSP formed
to ensure they know their clients and their source of funds. them. Whilst having the same features of companies used
If intermediaries pass on clients, they are liable for the in money laundering is not a direct link to criminality, these
standard of checks carried out by those third parties. entities should be considered as suspicious and high risk.
Similarly, those incorporating and managing these entities
There are thousands of legal and accountancy firms, as should be subject to enhanced scrutiny from their AML
well as dedicated TCSPs, who operate in this area in the supervisors.
UK. Twenty-two different money laundering supervisors
oversee this type of regulated activity. This fragmented For example, Milltown Corporate Services and Ireland
approach has led to varying AML standards in businesses & Overseas Acquisitions – which were used to control
offering these services, as firms are subject to differing UK entities involved in dozens of money laundering and

97 https://www.gov.uk/government/consultations/corporate-transparency-and-register-reform [Accessed 29 August 2019]

98 Transparency International UK, Hiding in plain sight p.16
99 The true number of UK shell entities that have existed over the years is likely to be larger than this. We were unable to carry out analysis on entities dissolved over six years ago as well as
Scottish Limited Partnerships, where data on officers is not available for bulk analysis.
21 At Your Service

corruption cases – have been corporate partners of at offer clients a place to direct their mail for personal and
least 1,400 UK LLPs.100 The TCSP behind these entities, business use, and often promote their location as a way
IOS Group, lists offices in Riga, Kyiv and Moscow. Their for companies to look more professional. Although used
business includes setting up offshore companies as well by completely legitimate businesses, these services are
as UK legal entities.101 It formed at least 35 of the 75 also attractive to money launderers, with UK addresses
BVI companies at the centre of the Troika Laundromat, offering a veneer of respectability.
exposed by OCCRP.102 There is no evidence that IOS
knows its clients will go on to commit crimes; however, Our research found that UK companies involved in money
it is apparent that it is often the formation of choice for laundering are often registered at the same address;
criminals. OCCRP’s efforts to contact the firm about its around half (374) of the 766 companies we identified
involvement in the Troika Laundromat were unsuccessful. as involved in corruption and money laundering in 2017
were registered at just eight addresses. More than one-
In a separate analysis, Bellingcat identified over 5,900 third (6,073) of the 17,000 suspicious entities we found
Scottish Limited partnerships (SLPs) with opaque as part of our shell company analysis (see page 28)
structures formed between 2015 and 2019.103 SLPs are were registered at just 10 English addresses (see Table
a type of UK entity that corrupt individuals have used 2) another indication that the same TCSP formed and
to launder money. The 5,945 entities Bellingcat found managed these shell companies. Whilst these addresses
were registered by four groups of formation agents that host hundreds, sometimes thousands, of suspicious
have previously incorporated SLPs involved in money entities, we do not suggest that every company registered
laundering. Bellingcat identified 86 offshore partners at these locations are suspected of involvement in financial
controlling thousands of these SLPs, who also controlled crime, which also host legitimate businesses.
4,637 other types of UK legal entities, usually LLPs.
Currently, SLPs cannot be dissolved like other UK Case study: Cornwall Buildings
corporate entities; therefore, all of these SLPs could still be
active. Our analysis of the suspicious UK legal entities (above)
identified various formation agents operating from the
Cornwall Buildings, 45 Newhall Street, Birmingham.
Mailbox services These agents are linked by both those involved in their
management and their dubious clients.
Mailbox services offer a solution to those looking to
save money on renting a physical office space. They One of these, Meridian Companies House, operated from

Table 2: Top 10 registered addresses for network of suspicious UK companies

No. of suspicious companies

Address
registered
Cornwall Buildings, 45 Newhall Street, Birmingham 1,455

Suite B, 2nd Floor, 175 Darkes Lane, Potters Bar 1,094

Unit 5, Olympia Industrial Estate, Coburg Road, London 810

Office 11, 43 Bedford Street, London 636

Suite B 11, Churchill Court, 58 Station Road, Harrow 519

Unit W17, Mk Two Business Centre, Barton Road, Water Eaton, Bletchley 395

Suite 1, The Studio St Nicholas Close, Elstree 392

372 Old Street, Suite 1, London 270

Winnington House, 2 Woodberry Grove North, Finchley, London 259

10 Great Russell Street, London 243

100 https://www.occrp.org/en/daily/9401-swedbank-s-shady-business-in-estonia [Accessed 28 August 2019]

101 https://www.private-eye.co.uk/pictures/special_reports/where-theres-muck.pdf [Accessed 28 August 2019]
102 https://www.occrp.org/en/troikalaundromat/how-ios-group-supersized-the-shell-company-game [Accessed 10 July 2019]
103 Bellingcat, Smash and grab – The UK’s money laundering machine (October 2019) https://www.bellingcat.com/news/uk-and-europe/2019/10/01/smash-and-grab-the-uks-money-
laundering-machine/
 Transparency International UK 22

this address between 2005104 and 2014105 – the period Boze.119

in which most of the companies identified in our analysis
were registered at the address. Nominee services

Meridian formed Nomirex Trading Limited,106 a shell Nominee services are where individuals are employed
company used to launder funds stolen from the Russian to be a director or shareholder under the instruction of
Treasury originally belonging to Hermitage Capital – a another person. They are used to try to hide the ultimate
private investment fund founded by Bill Browder.107 controllers or beneficiaries of a company. Technically,
Previously, OCCRP had identified the owner of Meridian nominee directors acting purely on instruction from
as Erez Maharal. When OCCRP contacted him about another person should not exist, as the law requires that
his relationship with Nomirex, he said ‘We just registered directors must act independently and in the best interest
the company, and nobody ever makes us aware what is of the company.120 Since the introduction of the PSC
going on with the company in future … I feel that I was register, those wishing to evade disclosing a company’s
framed.’ 108 Our research has found new evidence that true owners have faced the choice of either claiming
shines a light on who controlled Meridian during the period not to have a beneficial owner or choosing to pay for a
in which so many of these suspicious companies were nominee PSC. Both of these options could face criminal
incorporated. sanctions for submitting false or misleading information to
Companies House.
Sabine Boze, who later changed her name to Sabine
Vickers, signed-off the accounts of many of the Large scale TCSPs do not advertise nominee director,
companies at Cornwall Buildings.109 Currently, she is shareholder or PSC services. However, we have identified
reported as the director of two UK TCSPs: B2B Company several smaller TCSPs that do not appear to understand
Secretary Limited110 and The Island Service Provider.111 or intend to follow the laws around nominees. We have
The Island Service Provider is registered with HMRC identified at least one of these smaller TCSPs that has a
and reports its address as 372 Old Street, London.112 connection to suspected financial crime.
Currently, the reported ultimate owner of B2B Company
Secretary Limited113 and The Island Service Provider114 Case study: Nominee Directors, Shareholders and PSCs
is Alex Zingaus, who runs a global firm called Pirineu
Administrative Servei, ‘providing services for international Using only a quick Google search, we found 23 active
corporate planning, asset management for High Net TCSPs offering nominee director, shareholder and PSC
Worth Individuals.115 Zingaus and Maharal are friends on services. One of these firms, Coddan CPM Limited, was
Facebook, indicating at least a possible social relationship responsible for forming thousands of UK companies we
between the two.116 Although Meridian Companies House identified in our analysis of suspicious UK legal entities (see
dissolved before the new Persons with Significant Control page 28). In 2015, a Coddan employee was also found
(PSC) transparency requirements came into force,117 a to have submitted false accounts.121 For its nominee PSC
LinkedIn profile for Alex Zingaus states he is the owner service, its website states:
of this TCSP. 118 Meridian Companies House is also
recorded as the accountant for one of the several identikit
companies registered at Cornwall Buildings, Marshell
Oil LLP, whose signatory for the accounts was Sabine

104 https://beta.companieshouse.gov.uk/company/05072048/filing-history/NzY4Mzc3MzNhZGlxemtjeA/document?format=pdf&download=0 [Accessed 4 September 2019]

105 https://beta.companieshouse.gov.uk/company/05072048 [Accessed 4 September 2019]
106 https://www.reportingproject.net/proxy/jdownloads/Russian%20Laundering%20Machine/doc_nomirex_04.pdf [Accessed 2 July 2019]
107 https://www.telegraph.co.uk/news/worldnews/europe/russia/10022843/The-yoga-guru-and-the-British-firms-at-the-heart-of-Sergei-Magnitskys-death.html [Accessed 9 September 2019]
108 https://www.reportingproject.net/proxy/en/russian-laundering-machine [Accessed 2 July 2019]
109 https://beta.companieshouse.gov.uk/company/08500723/filing-history/MzE1NDY2NTY5MWFkaXF6a2N4/document?format=pdf&download=0 [Accessed 4 September 2019]
110 https://beta.companieshouse.gov.uk/company/07789221/officers [Accessed 4 September 2019]
111 https://beta.companieshouse.gov.uk/company/08500723/officers [Accessed 4 September 2019]
112 https://customs.hmrc.gov.uk/msbregister/search.do?type=getTrader [Accessed 2 July 2019]
113 https://beta.companieshouse.gov.uk/company/07789221/persons-with-significant-control [Accessed 4 September 2019]
114 https://beta.companieshouse.gov.uk/company/08500723/persons-with-significant-control [Accessed 05 June 2019]
115 https://bosco-conference.com/en/speaker/alex-zingaus [Accessed 5June 2019]
116 https://www.facebook.com/profile.php?id=100006352126870&lst=100000011217735%3A100006352126870%3A1567584548&sk=friends&source_ref=pb_friends_tl [Accessed 4
September 2019]
117 This requires most forms of UK legal entity to report the ultimate controller or beneficiary of the company, which is usually anyone holding over 25 per cent of its shares or voting rights,
holds the right to appoint or remove the majority of the board of directors, or otherwise exerts significant control.
118 https://www.linkedin.com/in/alex-zingaus-88920132/ [Accessed 4 September 2019]
119 https://beta.companieshouse.gov.uk/company/OC310907/filing-history/MjA0MDU1MTY1MmFkaXF6a2N4/document?format=pdf&download=0 [Accessed 4 September 2019]
120 Companies Act 2006, Sections 172 and 173 https://www.legislation.gov.uk/ukpga/2006/46/part/10/chapter/2
121 https://www.gov.uk/government/news/high-court-orders-two-opaque-limited-liability-partnerships-into-liquidation [Accessed 2 July 2019]
23 At Your Service

‘If you do not want to be name [sic] as the Case study: Baltic Banks and hot money from the FSU
PSC, check our fourth private company
One noticeable trend over the last decade has been
registrations for worldwide patrons.’122 the prevalence of opaque UK companies with accounts
‘With this option, the person with at Baltic banks, which have been used to move large
significant control doesn’t need to be amounts of suspicious wealth, principally out of the
FSU.125 From investigations into these financial flows,
registered for public records. We will we have started to build a picture of how introducers
establishing [sic] a trust, arrange two have provided accounts in these institutions for UK shell
trustees, create a UK company and companies.

prepare the annual return (confirmation Following reports of widespread irregularities from
statement).’ a whistle-blower at its local Estonian branch, an
Coddan CPM Limited Website independent audit report of Danske Bank found almost
£200 billion worth of suspicious transactions flowing
Another TCSP, CFS International Formations, provides a through its books between 2007 and 2015. UK companies
nominee shareholder service that appears to suggest it held a substantial element of the local bank’s non-resident
can hide the details of a company’s beneficial owner. In portfolio, with LLPs being the ‘preferred vehicle for non-
total, we were able to confirm that 21 of these 23 TCSPs resident clients.’126
were based in the UK or had branches here. Nine of these
firms were registered with HMRC as their AML supervisor, At the peak of this activity, in 2013, almost 1,200 UK
including Coddan and CFS International Formations.123 companies held accounts at Danske, and the UK was the
single most prevalent country of origin for the bank’s non-
resident clients. The report indicated many of these legal
‘A Nominee Shareholder is the registered entities obtained accounts through ‘25 agents receiving
owner of shares within a company. The commissions for their efforts in locating customers.’127
beneficial owner may choose to appoint It is possible that similar arrangements have been used
elsewhere to attract risky non-resident clients to banks in
a Nominee Shareholder because they do the region.
not want to register the shares in their
own name. A Nominee Shareholder is a In February 2019, the Swedish financial regulator,
Finansinspektionen (FI), and its Estonian counterpart
great way to keep shareholder information jointly announced that they would investigate allegations
away from public records. We do not get the Swedish broadcaster, SVT, made into alleged money
involved in the running of your company laundering failures at the Estonian branch of Swedbank.
SVT claimed that, between 2007 and 2015, at least SEK
and are on the Companies House’124 40 billion (£3.2 billion) of questionable payments passed
CFS International Formations website between Danske and Swedbank’s Estonian subsidiary.128
These reports identified two UK companies involved in
Introducing making suspicious payments of over £100 million from
Danske to customers at Swedbank.129
Introducing is the act of helping clients gain a business
bank account. For money launderers this service can Currently, it is unclear whether introducers were also
provide the entry point into the global financial system for used to help secure accounts for non-resident clients at
their shell company. Thanks to the work of investigative Swedbank. In April 2019, the FI announced it was initiating
journalists at the OCCRP, we now know more about how a joint investigation with its counterparts in Latvia, Estonia
this works in practice, although the full scale of the activity and Lithuania to assess potential breaches of money
remains unknown. laundering rules at Swedbank. It expects the investigation

122 https://www.coddan.co.uk/ [Accessed 7 August 2019]

123 We were unable to identify whether the rest were supervised by professional bodies or were operating without having registered with a UK AML supervisor.
124 https://www.cfsformations.com/index.php?option=com_incorporations&Itemid=369&vg=service-pages&view=serviceadd&servicepos=0&services[0]=NOMINSUB [Accessed 7 August
2019]
125 Graham Stack, Baltic shells: on the mechanics of trade-based money-laundering in the former Soviet space (2015) https://www.emerald.com/insight/content/doi/10.1108/JMLC-10-2013-
0040/full/html
126 Bruun & Hjejle, Report on the non-resident portfolio at Danske Bank’s Estonian branch (September 2018) p.51 https://danskebank.com/-/media/danske-bank-com/file-cloud/2018/9/
report-on-the-non-resident-portfolio-at-danske-banks-estonian-branch-.-la=en.pdf
127 Bruun & Hjejle, Report on the non-resident portfolio at Danske Bank’s Estonian branch p.35
128 https://www.svt.se/special/swedbank/ [Accessed 8 August 2019]
129 https://www.svt.se/special/swedbank/varningsflaggorna/malvakter/ [Accessed 8 August 2019]
 Transparency International UK 24

to conclude by October 2019, with any resulting sanctions Table 3: Top 10 nominees signing off accounts for UK
being determined before the end of the year.130 companies linked to money laundering and corruption

Accounts Nominee name No. of accounts signed

A key element of company maintenance is preparing, Ali Moulaye 516

auditing, signing-off and submitting annual accounts,
which is a legal requirement for most forms of UK legal Sabine Boze/Vickers133 207
entity. Corrupt individuals use the expertise of enablers to
Erik Vanagels 133
help mask financial activity or use accredited accountants
to give their company a stamp of approval.
Juri Vitman 62

Whilst auditors must receive accreditation and official Kang Dong-Hee 32

qualifications, this is not true of accountants or those
offering general accountancy services. This makes it James Dickins 28
a diverse sector – one that includes at least 24,000
regulated firms and individuals. Thirteen different Rachel Amy Erickson 25
professional bodies and HMRC oversee this regulated
community. Our research has found many more Dmitrijs Krasko 24
unsupervised firms and individuals offering services in the
Daniel O'Donoghue 22
UK.
Ian Taylor 20
Case study: Who is signing off accounts for UK shell
companies?
It has been difficult to establish the exact role these
We analysed the accounts, stretching back 10 years, individuals played in authorising the accounts we
of 583 UK companies we have identified as being analysed. The most prolific signatory of these financial
involved in corruption and associated money laundering. statements was an individual called Ali Moulaye, who a
This amounted to 2,775 documents.131 More than 60 Buzzfeed investigation found to be a dentist by training
different recognised UK accountancy firms of varying living in Belgium.134 He said he used to live in Latvia, and
size – including all four ‘Big Four’ firms – had signed claims individuals there linked to money laundering stole
these accounts. There is no suggestion these firms were his identity.
knowingly involved in economic crime.
OCCRP has identified both Erik Vanagels and Juri Vitman
Because there is no requirement for LLPs to use a as frontmen whose identities have likely been stolen
professional accountant to prepare their financial to form and administer companies in their names en
statements, and because only their members usually masse.135
sign off the accounts, there were some slightly less-
recognisable names in these statements (see Table 3).132 Another signatory in these accounts was Rachel Amy
Over half of the LLP accounts were signed by nominee Erickson, who an OCCRP investigation found was the
directors of the companies or corporate members of the former girlfriend of Ian Taylor, a TCSP banned from being
LLP, which were almost entirely registered in secrecy a UK corporate director.136 She claimed her identity had
jurisdictions like Dominica, Belize and the Seychelles. The been stolen to sign off hundreds of accounts like those in
number of accounts with an identifiable signature totalled our analysis.137
2,037, a large number of which were signed by those who
offered nominee services. Dmitrijs Krasko is a company formation agent who –
according to Companies House – is based in Latvia,
meaning he is subject to Latvian law rather than UK AML
rules.138

130 https://fi.se/en/published/news/2019/fi-comments-on-the-recent-events-involving-swedbank/ [Accessed 8 August 2019]

131 Limited Partnerships are not required to file accounts at Companies House.
132 https://www.gov.uk/government/publications/limited-liability-partnership-accounts-guidance/llp-accounts [Accessed 8 August 2019]
133 Companies House records suggest Sabine Boze and Sabine Vickers are the same person, appearing as directors of the same companies consecutively and sharing the same birthday.
134 https://www.buzzfeed.com/janebradley/shell-companies-money-laundering-uk-paul-manafort [Accessed 8 August 2019]
135 https://www.reportingproject.net/proxy/en/the-latvian-proxies [Accessed 29 August 2019]
136 https://beta.companieshouse.gov.uk/disqualified-officers/natural/x9YM3ogO1YnVSihjKzDuxjWdWdE [Accessed 05 June 2019]
137 https://www.occrp.org/en/component/content/article?id=1960:owners-battle-for-tv-station-ru [Accessed 2 July 2019]
138 https://beta.companieshouse.gov.uk/officers/pjlEQRG13biFmVN6UxrTaM08xJ8/appointments [Accessed 29 August 2019]
25 At Your Service

Property acquisition and conveyancing

Conveyancing property is a key risk area for the legal

sector. An NCA analysis of SARs related to the sector
in 2016 revealed that 50 per cent related to property
transactions. Solicitors conveyance property transactions
on behalf of buyers and sellers and are required to carry
out money laundering checks on both.

The SRA regulates 80 per cent of the legal sector.144

Data on the SRA’s supervisory activity indicates it has
a limited reach, conducting under 200 assessments of
Property transactions the 10,400 firms it regulates in 2017/2018. As a result of
these, just one firm was expelled and seven fines were
There is now a wealth of evidence that corrupt individuals issued, amounting to £70,500. This does not appear
see UK property as an attractive asset; it offers stable proportionate related to the likely levels of non-compliance
prices and, in the case of luxury property, status. with the MLRs within these firms given the number of
properties we have found bought with suspicious funds.
Around 100,000 properties are sold every month in the
UK.139 Almost 20,000 estate agents and thousands of Our analysis of Land Registry data identifies a wide
solicitors offering conveyancing services, conduct this range of law firms engaged in transactions that involved
activity.140 suspected or proven corrupt funds.

Using open-source data,141 we have identified 421 We analysed 293 property transactions, worth more than
properties, worth £5 billion, bought with suspicious £4.4 billion, involving suspicious wealth relating to PEPs
wealth.142 This may just be the tip of the iceberg because from high-corruption-risk jurisdictions or those charged or
87,000 properties in England and Wales are owned by convicted with, or alleged to have committed, corruption
companies based in secrecy jurisdictions, where there offences. We identified 56 law firms involved in 132 of
is no information about their beneficiaries.143 These these transactions, which were worth more than £3.2
‘anonymous’ companies appear regularly in corruption billion. These firms either offered conveyancing services to
and money laundering schemes. the buyer or were responsible for forming and maintaining
the entity used to make the purchase.
Of the land titles we identified, 138 (33 per cent), worth
at least £660 million, have been sold without apparent They varied in size from major international businesses
intervention from law enforcement agencies. However, to those employing fewer than 10 members of staff. It is
those with access to suspicious funds continue to own unclear whether any submitted SARs in response to the
283 properties (67 per cent), worth £4.4 billion. Of this activity they carried out for the buyers.
property, £220 million’s worth is subject to freezing orders
related to law enforcement cases or commercial court Using Land Registry data on property that offshore
decisions, which involve disputes over the legal sources of companies currently own, we found that these 56
funds used to buy these assets. law firms have been involved in at least 4,200 further
transactions involving secretive corporate vehicles, which
Property transactions can involve numerous service are a common feature of high-end money laundering. Due
providers, each with differing obligations to carry out to the opacity of the structures involved, we do not know
checks on their clients, including: who owns these properties at present.

• solicitors Case study: Daniel Ford & Co.

• estate agents
• mortgage providers We were sometimes able to identify a potential client base
• letting agents of these firms (due to the jurisdictions of the companies
• architects and interior design firms they used to complete transactions and their known

139 HMRC, UK Property Transactions Statistics (August 2019) https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/833143/UK_Commentary_

Sep_2019__cir_.pdf [Accessed 8 August 2019]
140 HM Treasury and Home Office, 2017 National risk assessment p.56
141 Investigations by journalists, the Panama and Paradise Papers, Land Registry and Companies House data
142 Property purchased by PEPs from high corruption risk jurisdictions, individuals with corruption allegations against them or those with charged or convicted with corruption offences.
143 https://www.globalwitness.org/en/press-releases/100bn-of-property-in-england-and-wales-is-secretly-owned-estimates-show/ [Accessed 1 August 2019]
144 https://www.sra.org.uk/sra/how-we-work/reports/upholding-professional-standards-2017-2018/ [Accessed 8 August 2019]
 Transparency International UK 26

clients). One of the firms we identified, Daniel Ford & Co., bought with suspicious wealth from being sold. In 2017,
was named in US court documents as acting on behalf of two years after Jahangir Hajiyev was jailed in Azerbaijan
Diezani Alison-Madueke, the former Nigerian petroleum for embezzling funds from the bank he chaired, his family
minister alleged to have received bribes in exchange for attempted to sell a UK golf course they owned. To do this,
oil deals.145 The documents reveal the firm ‘assisted in they approached Savills to market the property and act as
the purchase’ of three London properties linked to the their agents. After carrying out due diligence on the family,
investigation – two bought with Seychelles firms and Savills declined to offer its services.
another bought with a BVI company.146
However, between 2013 and 2016, the family succeeded
Our analysis shows that Daniel Ford & Co. has been in building and marketing a country-house in Surrey.151
involved in at least 74 more property purchases involving After helping to develop the five-bedroom, Regency-style
companies based in secrecy havens, including 32 mansion, Werner Capital – a family office – publicised
Seychelles companies, 10 BVI companies and five its luxury features, including an indoor lap pool and a
Nigerian companies. It is unclear whether Daniel Ford lift used to lower cars into an underground garage, in a
submitted SARs related to any of these transactions. promotional video.152 The property was originally put on
the market for almost £9 million.153 Werner Capital also
Daniel Ford & Co. states it always conducts its work within helped set up companies used to acquire the family’s golf
the law and regulations. course in addition to producing a report stating Jahangir
Hajiyev was worth £55 million.154 Tomas Werner, who runs
the firm, declined to comment on the business relationship
Property Sales with the Hajiyevs for client confidentiality reasons, but said
they set up corporate structures used to acquire the golf
Estate agents typically represent the sellers of property, course based on advice from a ‘top-tier’ UK Law firm.
but are required by the MLRs 2017 to carry out checks on Werner Capital have stated they have never been involved
buyers, too. in money laundering.

Estate agents are supervised by HMRC, which recently

issued its highest ever penalty against the country’s largest Mortgage provider
estate agent, Countrywide, for group-level failings.147
Whilst HMRC has increased its regulatory activity relating Suspicious transactions involving property are often
to estate agents,148 it lacks the resources to sufficiently completed in cash, with no finance needed. However, on
scrutinise all the (almost 10,000) property firms it oversees. some occasions corrupt individuals may seek to secure
RUSI estimates that around 20,000 estate agents operate an asset or re-organise their finance with the help of a
in the UK, indicating that thousands are not currently mortgage. Our analysis of property bought with suspicious
overseen by an AML supervisory body and are unlikely to wealth identified 24 FCA-supervised financial institutions
be carrying out checks on clients or their funds.149 providing finance for 83 property purchases for PEPs
from high-corruption-risk jurisdictions or those charged or
Estate agents rarely identify suspicious activity, submitting convicted with, or alleged to have committed, corruption
a tiny proportion of SARs. In 2017-18, estate agents offences. These properties are worth almost £2.5 billion.
submitted just 710 SARs.150
Case study: Ali Dabaiba
Case study: Selling property bought with unexplained
wealth Ali Dabaiba – a former Gadaffi associate who Libyan
authorities believe to have stolen billions of pounds whilst
Regarding the UK’s first case involving unexplained wealth he oversaw a public development agency – owns four
orders (UWOs), we have seen documents highlighting the London properties through companies registered in the
property service providers can play in preventing property BVI worth tens of millions of pounds.155 Land Registry

145 https://www.ballardspahr.com/~/media/Files/Articles/Galactica-Complaint [Accessed 16 July 2019]

146 https://www.ballardspahr.com/~/media/Files/Articles/Galactica-Complaint [Accessed 1 July 2019]
147 https://www.gov.uk/government/publications/businesses-not-complying-with-money-laundering-regulations-in-2018-to-2019/current-list-of-businesses-that-have-not-complied-with-the-
2017-money-laundering-regulations [Accessed 31 July 2019]
148 https://www.gov.uk/government/news/estate-agents-targeted-in-money-laundering-crackdown [Accessed 31 July 2019]
149 RUSI, Known unknowns p.40
150 NCA, Suspicious activity reports (SARs) annual report 2018 p.6
151 https://issuu.com/ameliagarcia/docs/amelia_garcia._issuu [Accessed 18 September 2019]
152 https://www.youtube.com/watch?v=AwZUiVagAsc [Accessed 16 September 2019]
153 https://www.primeresidential.org.uk/developer/werner-capital/ [Accessed 18 September 2019]
154 https://www.bloomberg.com/news/features/2019-07-30/dirty-money-spotlights-role-of-family-offices-as-enablers [Accessed 16 September 2019]
155 https://www.occrp.org/en/investigations/8366-cyprus-records-shed-light-on-libya-s-hidden-millions [Accessed 2 July 2019]
27 At Your Service

documents show that, between 2012 and 2014, Dabaiba Case study: Suspicious Laundromat payments to lettings
took out mortgages for all four homes with the Dublin firms
branch of Liechtenstein-based LGT Bank AG, despite
the Libyan Transitional Council blacklisting him in 2012. Using Laundromat data, we have identified 27 payments
Numerous media articles on Dabaiba and his properties to 17 different firms offering letting services. It is unclear
have since been published; however, the mortgages still who benefitted from these rent payments; they all came
appear on the land titles.156 from anonymous companies with Latvian bank accounts.
Whilst letting agents are not legally obliged to carry out
checks under the MLRs, some of the firms we identified to
Property letting be offering services were regulated for other activities they
undertook during the period in which these transactions
When the UK transposes the 5MLD, letting agents were made.
facilitating rent transactions worth over a €10,000 a month
will be required to carry out checks both on landlords
and tenants.157 However, prior to this there have been Architects and interior-design firms
no mandatory checks on those letting expensive luxury
property. There are many businesses offering high-end services
in the property sector who are not required to adhere to
Case study: The former Prime Minister of Moldova’s son MLRs, including architects and high-end interior design
and the £400,000 rental apartment firms. Corrupt individuals may seek the services of these
businesses to carry out work on property they own,
In February 2019, the NCA froze the UK bank accounts of increasing its value and laundering money in the process.
the son of the former Prime Minister of Moldova, Vladimir
Filat, who is currently serving a nine-year jail term for Case study: Laundromat payments to architects
his role in large-scale embezzlement at three Moldovan
banks. His son, Luca, arrived in the UK in 2016 – a year Using Laundromat data, we have identified 433 payments
after Vladimir’s arrest – and paid £400,000 up-front to rent to 37 UK architectural and interior-design firms amounting
of a Knightsbridge penthouse.158 to £8.3 million. These payments came from anonymous
shell companies with Baltic bank accounts.

Figure 1: Laundromat invoice to Doncaster Limited

156 https://www.thetimes.co.uk/article/revealed-gadaffi-aide-ali-dabaibas-3m-edinburgh-property-haul-8wjfff9v9 [Accessed 8 August 2019], https://www.wsj.com/articles/libyas-hunt-for-

gadhafi-era-assets-leads-it-to-high-end-u-k-property-firm-1399514660 [Accessed 8 August 2019]
157 The monetary threshold has not yet been set, however under 5MLD it must be no higher than 10,000 euros per month European Union Parliament and Council, Directive (EU) 2015/849
on the prevention of the use of the financial system for the purposes of money laundering or terrorist financing, and amending Directives 2009/138/EC and 2013/36/EU https://eur-lex.europa.eu/
legal-content/EN/TXT/?uri=CELEX:32018L0843 [Accessed 10 September 2019]
158 https://web.archive.org/web/20190209124154/http://www.nationalcrimeagency.gov.uk/news/1565-son-of-moldova-s-ex-pm-renting-1000-per-day-knightsbridge-apartment-forced-to-
hand-over-nearly-half-a-million-pounds [Accessed 4 September 2019]
 Transparency International UK 28

It is unclear what work the majority of these payments

related to; however, two payments totalling £800,000
were made to David Collins Studios Ltd. in relation to work
done on a property in Holland Park by Berglake Sales Inc.
(a Belize company) and Doncaster Limited (an Anguillan
company). Both these firms were part of a web of shell
companies used to launder stolen wealth from the Russian
Treasury.159

One of the payments from Doncaster Limited claimed the

transactions was for washing machines despite David
Collins being an architectural firm (See Figure 1). This
appears to show trade mis-invoicing, a common method
money launderers use to hide the true value, volume or
purpose of payments through the deliberate falsification of
documents. An individual may have been seeking to hide
transactions relating to expensive architectural work on
their London home.

David Collins said that they do not take on clients without

doing industry due diligence and that these invoices did
not originate with them.

There is no suggestion that David Collins was actively

involved in laundering illicit wealth; however, this case
shows how the unregulated property sector can be
exposed to suspicious wealth.

159 https://www.docketalarm.com/cases/New_York_Southern_District_Court/1--13-cv-06326/United_States_of_America_v._Prevezon_Holdings_Ltd._et_al/555/2/ [Accessed 2 July 2019]

29 At Your Service

for services totalling £17.6 million, 419 of which came

from anonymous shell companies with Lithuanian bank
accounts. A breakdown of these services can be seen in
Table 4 below.

Table 4: Laundromat payments to luxury goods and

service providers by type of goods or service

No. of Value of
Service type
transactions payments

Jet services 37 £6,028,894.71

High-value goods Clothing 262 £5,370,885.29

Items like cars, jets and jewellery act as both stores of Jewellery 32 £1,959,923.53
wealth for corrupt individuals and luxury purchases to
enjoy. HMRC supervises high-value dealers, who are Yacht sales 34 £1,806,317.65
required by the MLRs 2017 to carry out money laundering
checks if they receive payments in excess of €10,000 in Art 13 £1,051,462.35
physical cash.
Cars 9 £507,378.82
As cash is rarely used or accepted, this is likely to mean
Auction 7 £349,640.59
that high value dealers in the UK are not carrying out
checks on many of their clients. Despite this, they can still
High-value goods 5 £169,271.18
be held criminally liable for failing to disclose suspicious
activity. Those offering these services infrequently report Wine 10 £149,971.76
such activity. In 2017-18, auction houses and high-value
dealers submitted just 105 SARs.160 In practice, the onus Sport event 1 £115,482.94
often falls on banks or other financial providers to identify
suspicious activity in relation to the purchase of high-value Antiques 11 £103,561.18
items.
Grand total 421 £17,612,790 
A wide variety of service providers may fall under this
broad category, including, but not limited to: Whilst it is not clear from the data what each purchase
was, it is possible to identify the nature of individual
• auctioneers transactions, such as:
• art houses
• jewellery stores • a Chanel crocodile skin handbag and Tom Ford
• car vendors crocodile skin jacket from Harrods totalling £50,690
• yacht sales
• jet sales • two payments to Flying Fish Hover, a firm dealing in
• general luxury goods hovercrafts, totalling £34,827

Previous money laundering cases have shown a variety • a shell company paying Chelsea Football Club for
of these outlets offering services to corrupt individuals. a corporate executive box at Stamford Bridge,
For example, in addition to spending £400,000 on rent up £126,000
front, Luca Filat, (aforementioned son the of jailed former
Moldovan Prime Minister), spent £200,000 on a Bentley None of these companies are accused of any wrongdoing.
Bentayga at a Mayfair dealership.161 The broad range of businesses identified in our review
of this data shows how exposed the luxury goods and
Case study: Suspicious Laundromat payments to high- services sector is to suspicious wealth.
value dealers

Our analysis of Laundromat transactions revealed at

least 422 payments made to 118 UK luxury good outlets

160 NCA, Suspicious activity reports (SARs) annual report 2018 p.15
161 https://nationalcrimeagency.gov.uk/news/son-of-moldova-s-ex-pm-renting-1000-per-day-knightsbridge-apartment-forced-to-hand-over-nearly-half-a-million-pounds?highlight=WyJtb2xk
b3ZhIiwibW9sZG92YSdzIl0= [Accessed 31 July 2019]
 Transparency International UK 30

Case study: Luxury purchases related to 1MDB

The theft of £3.5 billion from the Malaysian state sovereign

wealth fund 1MDB illustrates how, once laundered, high-
value goods are used as leverage for further financing
and an end in themselves. In the Department of Justice’s
(DoJ) complaint against Jho Low, the businessperson at
the centre of the 1MDB scandal, prosecutors allege he
used laundered funds to purchase a range of luxury goods
including a yacht, a jet and diamonds.162 The complaint
details how Jho Low used companies headquartered
and operating in the UK, including a world-renowned
auctioneers and a major law firm, to obtain these items.

In 2013, the DoJ alleges that Jho Low used stolen funds
to purchase a Claude Monet painting called the Petit
Nympheas from Sotheby’s London auction house for
almost £34 million. Allegedly, Low also bought tens of
millions of pounds of artwork from Christie’s New York
showroom, including works by Jean-Michel Basquiat
and Vincent Van Gough. Subsequently, Jho Low used
the artwork bought from Christie’s as collateral for a loan
that helped him purchase a yacht for over £100 million.163
London law firm Hill Dickinson LLP helped facilitate this
transaction.

Jho Low’s legal team claim he is not guilty of bribery

and money laundering.164 Christie’s have stated they are
‘committed to the fight against money laundering and
terrorist financing’ and have a robust AML programme.
After allegations relating to Low became known, they
ended their involvement with him. Christie’s state they
have not been accused of wrongdoing in any government
filing. Sotheby’s state ‘it always cooperates with
government investigations’.165

162 U.S. v. Low Taek Jho, et al https://www.justice.gov/opa/press-release/file/973671/download [Accessed 16 July 2019]

163 U.S. v. Low Taek Jho, et al p.196
164 https://www.bbc.co.uk/news/business-46062576 [Accessed 26 November 2011]
165 https://www.lexology.com/library/detail.aspx?g=a226abde-c9be-4124-bc24-5c4647c388d3 [Accessed 16 July 2019]
31 At Your Service

3,000 individuals, and their families, who were granted

these ‘Golden Visas’ during this period. During the blind
faith period, 37 per cent (1,115) of these visas were
awarded to Chinese (and Hong Kong) nationals, and 23
per cent (695) were awarded to Russian nationals.

Since our report in 2015, there has been growing evidence

that our concerns were well placed; more information has
come to light about individuals linked to financial crime
being able to obtain these visas.167 The UK Government
claims that reforms it made to the scheme in 2015 –
including requiring applicants to obtain a UK bank account
Lifestyle management before being granted a visa – reduced the scheme’s
vulnerability to corrupt individuals gaining access to the
A variety of firms in the UK and abroad offer corrupt country. However, a joint investigation by The Sunday
individuals the opportunity to have not only their assets Times and Dispatches has since uncovered financial
but also their day-to-day lives managed for them. These advisers and banks claiming to be able to circumvent
organisations: these checks for clients.168 This calls into question the
effectiveness of the new checks in deterring corrupt
• offer visa and immigration services to enable corrupt individuals from using the system.
individuals and their families to gain UK residency,
and even citizenship Case study: The Hajiyev family

• manage and invest wealth in different asset classes The Hajiyev family, whose property was subject to the
UK’s first UWOs, benefitted from Tier 1 (Investor) visas,
• give logistical day-to-day support, including child- which facilitated their permanent leave-to-remain status
care, shopping and travel arrangements in the UK. Court documents show that Gherson solicitors
– a firm specialising in immigration law – supported the
Providers of these services are often subject to the MLRs family’s application, including writing to the UK Border
and overseen by either the FCA (if they offer financial Agency on their behalf.169 Bordier and Cie, a Swiss bank,
advice or products), HMRC or one of the legal AML also provided supporting documents, indicating the family
supervisory bodies. However, many do not fall under the held in excess of £1 million in their account there.170
MLRs and are therefore not required to maintain policies,
processes and procedures to identify this activity. The court documents show both firms knew of the family’s
background. For PEPs like the Hajiyevs, companies are
required to undertake Enhanced Due Diligence measures,
Visa and immigration services such as deeper background research and potentially
source of wealth checks, to identify any evidence of
The UK offers fast-track access to permanent residency, financial crime. If during their relationship with a customer
and even citizenship, through its Tier 1 (Investor) Visa they have reasonable grounds to suspect money
system. In 2015, we released a report identifying laundering, then they must report it to the NCA.
weaknesses in the checks carried out on applicants to this
system between 2008 and 2015, which was dubbed the
‘blind faith’ period due to banks’ and the Home Office’s Financial investment assistance
lack of scrutiny on applicants’ sources of wealth during
this time.166 The Home Office relied on the commitment of UK based family offices and wealth management firms
the applicant to transfer their funds to a UK bank account provide high net worth individuals who have made (all or
after they were awarded the Tier 1 (Investor) visa. At the part of) their money through corrupt means with advice
same time, a UK bank might typically have accepted the and assistance on how invest and safeguard this money.
Tier 1 (Investor) visa as evidence that the individual was
suitable to open an account. As a result, it is unclear how
much scrutiny was given to the sources of wealth of the

166 Transparency International UK, Gold rush: Investment visas and corrupt capital flows into the UK (October 2015) https://www.transparency.org.uk/publications/gold-rush-investment-visas-
and-corrupt-capital-flows-into-the-uk/
167 https://www.thetimes.co.uk/article/whos-already-got-a-golden-visa-k7jg09f0f [Accessed 6 August 2019]
168 https://www.channel4.com/press/news/ps2-million-passport-welcome-britain-dispatches [Accessed 31 July 2019]
169 NCA v. Zamira Hajiyeva, 19 February 2018
170 NCA v. Zamira Hajiyeva, 19 February 2018
 Transparency International UK 32

Case study: Fern Advisers Case study: Nirav Modi

In a 2014 commercial court case, it emerged that Fern A recent example of this is that of Nirav Modi, an Indian
Advisers had begun acting as a family office for the diamond broker alleged to have defrauded Punjab
Shchukins. 171 They assisted in the relocation of funds National Bank, with the assistance of bank officials, of
deriving from the family’s businesses in Siberia.172 more than £1 billion.177 In March 2019, he was detained
Alexander Shchukin is currently under house arrest for his in UK after The Telegraph found him living in London.178
alleged role in a scheme to illegally obtain a Siberian coal During his time in London as a fugitive, he engaged the
mine and bribe regional public officials investigating the services of a personal assistant, Frances Hallworth-Nobel,
mine.173 who runs The London Concierge Company.179

Ildar Uzbekov – son in law of Alexander Shchukin, the The London Concierge Company specialises in ‘lifestyle
businessman at the head of the family – is a director of management’, with services including:
Fern .174 According to the court documents, Fern was
tasked with maintaining the family’s London presence (with • executive diary-management services
Alexander Shchukin’s daughter already residing in the
UK) and investing their funds in for-profit ventures.175 Fern • organising VIP cars
remains an active UK company, but we could not identify
it being registered with an AML supervisor. It is unclear • booking restaurants
whether funds derived from the mines under investigation
are being routed through it. • purchasing ‘special gifts’ for clients180

The Shchukin family denies involvement in criminal activity, The company does not fall under the MLRs and therefore
claiming the case is politically motivated.176 does not have to carry out checks on clients. We make no
allegation of criminal wrongdoing by the firm. Mr Modi has
denied any wrongdoing.181
Concierge services

Concierge services assist corrupt individuals with their

day-to-day lives, including making appointments (such as
restaurant bookings) and travel arrangements.

Those providing concierge services are rarely regulated

for money laundering purposes. Criminals using these
services therefore benefit from not having to personally
interact with regulated activities, as it is the concierge who
procures items from high-value dealers or arranges the
rent of luxury property.

171 Fern Advisers Ltd v Burford & Ors [2014] EWHC 762 (QB) (01 April 2014) https://www.bailii.org/cgi-bin/format.cgi?doc=/ew/cases/EWHC/QB/2014/762.html&query=(fern)+AND+(cyprus)
[Accessed 2 July 2019]
172 Fern Advisers Ltd v Burford & Ors
173 https://www.pressreader.com/uk/the-sunday-telegraph/20181014/281719795547034 [Accessed 2 July 2019]
174 https://beta.companieshouse.gov.uk/company/06760138/officers [Accessed 4 September 2019]
175 Fern Advisers Ltd v Burford & Ors
176 https://www.pressreader.com/uk/the-sunday-telegraph/20181014/281719795547034 [Accessed 2 July 2019]
177 https://www.bbc.co.uk/news/world-asia-india-47621519 [Accessed 6 August 2019]
178 https://www.bbc.co.uk/news/world-asia-india-47621519 [Accessed 6 August 2019]
179 https://www.telegraph.co.uk/news/2019/03/23/concierge-super-rich-pa-forindias-wanted-man-nirav-modi/ [Accessed 6 August 2019]
180 http://www.londonconciergecompany.com/ [Accessed 6 August 2019]
181 https://www.bbc.co.uk/news/world-asia-india-47621519 [Accessed 6 August 2019]
33 At Your Service

term.184

Case study: Relative of Bashar Al-Assad

In May 2019, the NCA seized more than £20,000 in

from the niece of Bashar al-Assad, stating she had no
legitimate source of income and had family members on
international financial sanctions lists.185 She had recently
graduated from the University of the Arts London,186 where
international student fees were in excess of £17,000 per
year when she attended.187

Education Case study: Laundromat funds paid to UK educational

institutions
Prestigious UK educational institutions are a key pull factor
that brings corrupt individuals and their families to the UK. Using Laundromat data, we identified 492 payments worth
By sending children to independent school and university more than £4.1 million to 177 different institutions (see
in the UK, they can start to integrate themselves into Table 5). These payments all came from shell companies
society’s elite, gaining respectability and legitimacy in the with bank accounts at institutions that have since closed
process. This ‘reputation laundering’ could even lead to due to mismanagement and money laundering failings.
corrupt individuals gaining access to influence by building
ties with other wealthy, powerful families. Table 5: No. and value of payments from Laundromats to
types of UK-based educational organisations
There are a number of different types of education services
offered in the UK, all of which represent targets for those Number of Value of
seeking to buy world-class education with corrupt wealth. Service type
transactions payments
These include:
Independent schools 327 £2,795,046
• independent schools and universities providing
world-leading education services, as well as
respectability and access to elite social networks for Universities 59 £515,198
parents
Private language
32 £390,700
• educational consultants helping to secure places at school
the most prestigious institutions
Education consultants 47 £330,523
• guardians looking after children whilst their parents
live outside the UK (this may be particularly useful if Event 1 £61,967
the parent is an overseas PEP in public office)

Those providing educational services are not covered by Guardian 24 £53,725

the MLRs, but may submit SARs.182 Usually, it falls to the
banks involved in these transactions to carry out checks Adult education 2 £2,489
on where the money paying for these services comes
from.
Grand Total 492 £4,146,671
Case study: Gulnara Karimova’s Daughter
A variety of institutions and organisations received these
In March 2019, The Guardian reported that the daughter funds:
of Gulnara Karimova – under global investigation for her
role in bribery schemes worth £780 million – attended • Prestigious independent schools like Charterhouse
Brighton College,183 which charges up to £14,400 per and Harrow, and universities like University of St.

182 NCA, Suspicious activity reports (SARs) annual report 2018 p.15
183 https://www.theguardian.com/world/2019/mar/12/gulnara-karimova-new-details-emerge-in-story-of-uzbekistans-first-daughter [Accessed 2 July 2019]
184 https://www.brightoncollege.org.uk/admissions/fees-online-payment/ [Accessed 2 July 2019]
185 https://nationalcrimeagency.gov.uk/news/al-assad-family-cash-forfeited-in-london-court [Accessed 2 July 2019]
186 https://www.standard.co.uk/news/crime/assad-family-cash-frozen-after-dictators-niece-found-living-in-london-a4121211.html [Accessed 2 July 2019]
187 https://www.arts.ac.uk/study-at-ual/fees-and-funding/tuition-fees/undergraduate-tuition-fees [Accessed 2 July 2019]
 Transparency International UK 34

Andrews and University College London received

fees for teaching and tuition.

• Parents Abroad Limited and Bright World Guardians

received payments for guardian services.

• Gabbitas educational consultants, who assist

parents in gaining ‘top school places’ for their
children, received funds through the scheme.188

We make no allegations of wrongdoing against these

institutions, however these payments highlight the
exposure of those across the sector to suspicious wealth.

188 https://gabbitas.com/gabbitas-approach [Accessed 12 August 2019]

35 At Your Service

Criminal defence

Under UK law, it is possible to prevent corrupt individuals

from using illicit wealth to pay for legal defence. This is
reliant on the prosecuting authority successfully obtaining
a restraining order on a defendant’s assets.190 Such orders
require reasonable grounds to suspect that the defendant
has benefitted from criminal conduct. Legal expenses
cannot be paid with such funds.

Even when these orders are granted they are not

watertight, which can allow defendants access to corrupt
Legal defence wealth. Orders can be amended or varied, which can
reduce their scope, giving a corrupt individual access to
The UK is home to a legal community of thousands of funds they may have already successfully laundered.191
individuals and firms offering a variety of services. Corrupt
individuals are able to use these services to defend Should corrupt individuals retain control of their assets,
themselves and their commercial interests, and to cleanse these can be used to pay for expensive defence lawyers.
their reputations.

FATF identifies litigation as a way in which criminals may ‘The people that are involved in grand
seek to abuse the legal system.189 UK courts have ruled corruption, the corrupt elite, will be very
sham litigation, involving fabricated disputes to make a
litigious’192
transfer of funds appear legitimate, to be a form of money
laundering. Lawyers must ensure the case brought to Rupert Broad, head of the International
them is genuine and not an attempt to move criminal Anti-Corruption Co-ordination Centre
funds.
This has a knock-on effect for those seeking to pursue
Legal advice, advocacy work and representation are not these individuals in court. If a defendant is acquitted,
defined under POCA or the MLRs as ‘regulated activity’. prosecutors face paying the costs of bringing the case
Therefore, those providing these services are not required to court, which may be considerable due to the length of
to carry out full AML checks on clients for these services. time that corruption trials can last. This can deter police
Law firms will, however, be regulated for other services and prosecutors from using public funds to bring cases
they offer involving managing client funds, company they may lose to court.
formation or property transactions. For this work, one of
nine legal supervisory bodies or HMRC oversees them.
Commercial law
A serious and worrying pattern is the repeated use of
British law firms to issue cease and desist letters to Corrupt individuals who have not yet been prosecuted for
journalists and non-governmental organisations (NGOs) their crimes may seek to settle commercial disputes in UK
seeking to expose potential corruption, even if the stories courts, with the status of the legal system allowing them to
or journalists have no presence in the UK. Those providing gain respectability and legitimacy if they are successful.
these services will be required to abide by the MLRs,
but may not view this type of activity as a high money A 2019 report by Portland highlighted how exposed
laundering risk. those offering services in this sector are to those seeking
to legitimise their money and reputations.193 Overall, 119
litigants from India, Kazakhstan, Russia and Ukraine – all
considered high-corruption-risk jurisdictions – used UK
commercial courts in 2018-19.194

189 FATF, Money laundering and terrorist financing vulnerabilities of legal professionals (June 2013) pp.69-70 http://www.fatf-gafi.org/media/fatf/documents/reports/ML%20and%20TF%20
vulnerabilities%20legal%20professionals.pdf
190 Proceeds of Crime Act 2002, Section 40 http://www.legislation.gov.uk/ukpga/2002/29/part/2/crossheading/restraint-orders
191 A variation or amendment will only happen either if the prosecution agrees to it or the court orders it.
192 https://mlexmarketinsight.com/insights-center/editors-picks/anti-bribery-and-corruption/cross-jurisdiction/corrupt-elite-are-very-litigious,-which-complicates-probes,-says-anti-graft-
police-chief [Accessed 2 October 2019]
193 https://portland-communications.com/pdf/Commercial-Courts-Report-2019.pdf?utm_medium=email&utm_campaign=Send%20email&utm_content=Send%20email+&utm_
source=Email%20marketing%20software&utm_term=here [Accessed 10 September 2019]
194 https://portland-communications.com/pdf/Commercial-Courts-Report-2019.pdf?utm_medium=email&utm_campaign=Send%20email&utm_content=Send%20email+&utm_
source=Email%20marketing%20software&utm_term=here [Accessed 10 September 2019]
 Transparency International UK 36

Case study: Laundromat Payments to UK law firms PKF to gather information on Vladimir Chernukhin (a
business rival) and his wife’s financial activity.197 Deripaska
Our analysis of Laundromat payments, leaked to OCCRP, sought to pass the resulting information on to the NCA
identified 32 different UK law firms that received almost with a view to Chernukhin’s wealth being investigated.198
£9 million for legal services. Many of these are globally Howard Hill, Richard Forrest and Lee Stewart – all of
renowned firms with offices around the world. These whom worked for PKF – were fined £100,000 for data
payments came from shell companies with accounts protection offences related to this investigation in 2013.199
at Baltic banks that have now been closed. These very
same mechanisms have been used in the past to launder Oleg Deripaska said his company sought regular ‘due
money. It is unclear from the transaction data what diligence’ on Chernukhin, but he had no personal
services these UK firms supplied. involvement in instructing PKF.200

Many of the payment references indicate trade mis-

invoicing, with payment purposes bearing no relation to Reputation defence
the services the beneficiary firms normally provide. For
example, Clyde and Co LLP, a global law firm, received £1 UK law firms are also able to assist with reputation-
million over seven different transactions for ‘computers’, maintenance services. These services can be used to
whilst Edward Marshall LLP received a payment of enable corrupt individuals to silence allegations against
around £140,000 for ‘furniture’. Edward Marshall LLP them and hide adverse media. This is achieved through
were unable to search their records or provide any initially issuing ‘cease and desist’ letters to journalists and
information about the transaction they received because NGOs seeking to publish information on criminal activity.
the relevant details were destroyed under data protection Due to the high costs involved in legal battles that may
requirements. Clyde and Co. were unable to comment arise from publishing, this can result in the articles or
due to client confidentiality but say it holds itself to the reports not being published, or even being destroyed.
highest professional, legal and ethical standards and takes
responsibility for ensuring it meets them. Case study: Libel letters and the kleptocracy tour

Case study: Oleg Deripaska In 2017, Private Eye profiled Mishcon de Reya who
frequently provided cease and desist services to
Many of the litigants using the UK courts are wealthy clients.201 In 2016, the firm sent journalists who attended
billionaires, who made their fortunes from post-Soviet a ‘Kleptocracy Tour’ of London assets bought with
state privatisations. Oleg Deripaska – a Russian billionaire suspected corrupt wealth202 letters on behalf of their client,
accused of threatening the lives of business rivals, illegally Andrey Yakunin, whose property was featured in the event.
wiretapping a government official and taking part in
extortion and racketeering – has made repeated use of The letter threatened to sue anyone reporting on the
the UK commercial court system.195 This has involved tour or on allegations against Andrey Yakunin (the son of
attempts to sue business rivals, as well as to overturn Vladimir Yakunin, former head of Russian Railways, who
judgements against him. is currently under US sanctions). Whilst larger outlets
published pieces on the tour, the Ham & High newspaper
Deripaska denies these allegations against him; however, chose to apologise for and withdraw its own piece.203
UK court documents give an insight into the way in
which he conducts business. He lost a 2019 court Case study: Can law firms choose clients?
case over ownership of a Moscow factory after CCTV
footage showed what appeared to be armed force being Law firms are beginning to apply greater scrutiny to
used secure the facility.196 During the course of this potential clients, even for services outside of MLRs.
case, it emerged that Deripaska had employed forensic Following a Private Eye article highlighting how Clifford
accountants and private investigators from a firm called Chance had represented Teodoro Obiang in relation to

195 https://www.washingtonpost.com/world/europe/whatever-he-wants-inside-the-region-russian-oligarch-oleg-deripaska-runs-like-a-personal-fiefdom/2019/02/15/c00f7e10-1e61-11e9-
a759-2b8541bbbe20_story.html [Accessed 2 July 2019]
196 https://www.telegraph.co.uk/news/2019/02/07/putin-ally-loses-high-stakes-legal-battle-moscow-factory/ [Accessed 2 July 2019]
197 Oleg Vladimirovich Deripaska v. Lolita Vladimirovna Danilina and Vladimir Anatolevich Chernukhin [2019] EWHC 173 (Comm) Paragraph 248 http://www.serlecourt.co.uk/images/uploads/
news-and-events/Danilina_v_Chernukhin_approved.pdf
198 https://www.thetimes.co.uk/article/russian-oligarch-ordered-investigation-into-his-rival-s-wealth-7px0t66t6 [Accessed 2 July 2019]
199 R v Howard Hill, Richard Forrest and Lee Stewart https://www.judiciary.uk/wp-content/uploads/JCO/Documents/Judgments/hill-others-sentencing-remarks-201213.pdf [Accessed 2 July
2019]
200 https://www.thetimes.co.uk/article/briton-spied-on-oligarchs-factory-rival-gqpnss2ch [Accessed 2 July 2019]
201 Private Eye, Looting with Putin (2018) https://www.private-eye.co.uk/pictures/special_reports/looting-with-putin.pdf
202 http://kleptocracytours.org/ [Accessed 8 October 2019]
203 Private Eye, Looting with Putin
37 At Your Service

a US corruption case, the firm made a statement at our

2018 annual lecture saying they would not now ‘act for the
likes of Obiang even on an access to justice issue.’204

Whilst it is important that all individuals benefit from access

to justice, the UK legal community should consider what
more could be done to prevent corrupt individuals from
using the UK court system to attain impunity. For example,
if a firm wants to take on a client in such circumstances on
an ‘access to justice’ basis, it could be at legal aid rates.

204 https://www.transparency.org.uk/al18/ [Accessed 2 July 2019]

 Transparency International UK 38

Case study: Omnia Strategy and the Government of the

Maldives

In 2016, it emerged that Omnia Strategy – a UK law firm

headed by Cherie Blair – received £420,000 from the
Maldives Government to advise on media relations and
governance.209 This contract came at a time when the
Government of the Maldives was under threat of sanctions
for human rights violations.210 After the contract was
signed, Cherie Blair released a statement saying sanctions
on the Maldives were ‘inappropriate and unjustified’.211

Influence A Daily Mail investigation found that Mohamed Allam

Latheef – a businessman at the time on the Interpol
The UK is home to businesses that can offer influence red notice list over his involvement in corruption, arms
through media and political channels, both to corrupt trafficking, terrorism, and the embezzlement of more
individuals and regimes. This helps to build their legitimacy than £30 million in public money – paid £210,000 of
and gain political influence, which can help further cement the contract.212 Omnia took on the contract despite
their position of power. allegations that the democratically elected Government of
the Maldives had been deposed at gunpoint in 2012. The
Public relations work is not commonly perceived to be president at the time the contract was granted has now
a high money laundering risk, and is not subject to any been arrested for corruption offences he is alleged to have
statutory KYC or due diligence requirements. However, committed whilst in office.213
those firms that are members of a trade association
have codes of conduct they must adhere to, which The contract was terminated once the allegations around
include consideration of the public interest.205 Whilst it is Mohamed Allam Latheef. came to light. Ominia said
rare, occasionally PR firms are thrown out of their trade they would investigate the payment but they have not
associations for breaking these rules. published an update. Whilst there is no suggestion of
criminal wrongdoing on behalf of Omnia, this case calls
For example, the Public Relations and Communications into question their due diligence procedures.
Association (PRCA) expelled Bell Pottinger in 2017206 for
its role in what was described as a ‘hateful and divisive
campaign to divide South Africa along the lines of race’207 Political lobbying
for a business owned by the controversial Gupta family,
who were close associates of the then President, Jacob Public relations firms also offer their clients the opportunity
Zuma.208 to meet and gain familiarity with UK politicians, which
may be to their benefit. In our report In Whose Interest?
we identified lobbying by the Government of Azerbaijan,
Favourable media described in leaked US diplomatic cables as ‘feudal’ and
mired by multiple allegations of systemic corruption, using
A variety of UK firms offer advice and assistance to the services of UK lobbyists. However, this was far from an
individuals and regimes with corruption allegations against isolated incident.214
them. This often involves managing media relations and
coverage, with their clients seeking to suppress adverse
publicity and promote favourable exposure.

205 PRCA, Professional charter (2019) https://www.prca.org.uk/sites/default/files/downloads/PRCA%20Codes%20of%20Conduct%20-%2028th%20Feb%202019.pdf

206 https://www.prca.org.uk/campaigns/ethics/bell-pottinger-case-study
[Accessed 6 August 2019]
207 https://www.bbc.co.uk/news/business-41151361 [Accessed 4 September 2019]
208 https://www.bbc.co.uk/news/world-africa-22513410 [Accessed 4 September 2019]
209 https://www.dailymail.co.uk/news/article-3451999/Cherie-Blair-facing-corruption-probe-threat-420-000-deal-Maldivian-despot.html [Accessed 05 July 2019]
210 https://www.independent.co.uk/news/uk/politics/cherie-blair-s-firm-accused-of-unethical-profiteering-over-deal-with-maldives-10330023.html [Accessed 6 August 2019]
211 https://maldivesindependent.com/politics/cherie-blair-speaks-out-against-sanctions-on-maldives-117458 [Accessed 05 July 2019]
212 https://www.dailymail.co.uk/news/article-3451999/Cherie-Blair-facing-corruption-probe-threat-420-000-deal-Maldivian-despot.html [Accessed 05 July 2019]
213 https://www.dw.com/en/maldives-court-orders-arrest-of-ex-president-yameen-abdul-gayoom/a-47565284 [Accessed 6 August 2019]
214 Transparency International UK, In whose interest? Analysing how corrupt and repressive regimes seek influence and legitimacy through engagement with UK parliamentarians (July 2018)
pp.7-10 https://www.transparency.org.uk/publications/in-whose-interest
39 At Your Service

Case study: New Century Media

New Century Media – a UK public affairs firm that claims

to have ‘the highest level contacts across global business,
media and politics’ to further its clients’ interests215 – has
donated more than £153,000 to the Conservative Party
over the last 10 years.216 In 2014, an investigation by
The Guardian showed how the firm had helped Russian
MPs close to Vladimir Putin gain access to senior UK
politicians, including the then prime minister.217 Their
website shows that RosAtom, the Russian state nuclear
company, have also been clients.218

The firm also represented the personal foundation of

Dmytro Firtash, who the US DoJ alleged in a 2013
indictment was part of a scheme, dating back to 2006, to
bribe Indian officials in order to obtain a mining license.219
New Century assisted the charity to secure a prestigious
event in Parliament in September 2013, with prominent
MPs such as John Whittingdale in attendance.220
Firtash has remained in Vienna since the indictment was
published, seeking to fight extradition.

New Century Media is not a member of lobbying trade

body the Public Affairs Board and has not registered with
the statutory register of consultant lobbyists; its full list
of clients is therefore unknown. There is no evidence to
suggest New Century Media has broken the law; however,
the way in which it accesses parliamentarians exposes
how the UK political system is vulnerable to influence by
questionable individuals and parts of repressive regimes.

215 http://www.newcenturymedia.co.uk/about/ [Accessed 2 July 2019]

216 http://search.electoralcommission.org.uk/
Search?currentPage=1&rows=10&sort=Value&order=desc&tab=1&open=filter&et=rd&isIrishSourceYes=true&isIrishSourceNo=true&rptPd=3674&prePoll=false&po
stPoll=true&register=gb&register=ni&register=none&optCols=Register&optCols=IsIrishSource&optCols=ReportingPeriodName [Accessed 2 July 2019]
217 https://www.theguardian.com/politics/2014/jul/01/-sp-tory-summer-party-drew-super-rich-supporters-with-total-wealth-of-11bn [Accessed 2 July 2019]
218 http://www.newcenturymedia.co.uk/experience/ [Accessed 05 July 2019]
219 United States of America v Dmitry Firtash https://www.politico.com/f/?id=0000016b-817e-d5f3-a1ef-87ffa4710000 [Accessed 6 August 2019]
220 https://www.independent.co.uk/news/uk/politics/exclusive-tories-under-fire-for-links-to-pro-russia-lobbyists-9583023.html [Accessed 15 July 2019]
 Transparency International UK 40

Prestige companies

Globally renowned brands in the UK are a target for

corrupt individuals seeking to generate profit and build
legitimacy.

Case study: Investment in UK luxury goods brands

In 2014 two Russian businessmen, Dmitry Tsvetkov and

Rustem Magdeev, set up franchises for Graff Diamonds
and London’s Halcyon Art Gallery in Limassol, Cyprus.
Dmitry Tsvetkov is the son in law of Rinat Khayrov, a
High-profile investments Russian MP from Tatarstan. Tsvetkov is also alleged to
have benefitted from Russian state funds intended for the
The UK is home to hundreds of globally renowned brands production of drones. He has since denied involvement in
and institutions. Corrupt individuals may seek to launder this case.224
their reputations by making philanthropic donations to
these institutions, setting-up franchises of prestigious High Court documents relating to a case now being
brands, or buying them outright. fought between the two former partners allege Magdeev
has connections to organised criminals, a claim Magdeev
Recipients will often be under no obligation to carry out denies.225 The pair are also alleged to have bought and
money laundering checks on these funds; however, to sold tens of millions of pounds worth of Graff jewellery
protect their own reputations they may wish to carry out between 2014 and 2016, at which point the venture broke
due diligence on donors and investors, and their source of down due to a disagreement.
wealth.
Graff and Halcyon have now terminated their agreements
with the pair. It is unclear what checks they undertook
Philanthropic donations before allowing the Limassol franchise to proceed.

Corrupt individuals may seek to spend their illicit wealth

on setting up or donating to charitable or educational
institutions. Whilst this might not generate profit for
them, it is a way in which to launder their images, buying
respectability and legitimacy.

Case study: The University of Cambridge and Dmytro

Firtash

Between 2010 and 2012 Dmytro Firtash – currently

fighting extradition to the US from Vienna (see New
Century Media case study above) – invested £6 million to
The University of Cambridge,221 of which £4.3 million came
from his UK charitable foundation. In 2011 he was made
a member of the Guild of Cambridge Benefactors, and in
2012 he received the University of Cambridge Chancellor’s
800th Anniversary Campaign Medal for Outstanding
Philanthropy.222

Cambridge claim the benefaction ‘was fully investigated

and approved by the university’s advisory committee on
benefactions.’223

221 https://www.varsity.co.uk/news/12328 [Accessed 6 August 2019]

222 https://www.varsity.co.uk/news/12328 [Accessed 6 August 2019]
223 https://www.varsity.co.uk/news/12328 [Accessed 6 August 2019]
224 https://www.letemps.ch/economie/nimaginez-point-hommes-daffaires-dorigine-russe-sommes-controles [Accessed 05 July 2019]
225 https://www.thetimes.co.uk/article/the-super-rich-graff-diamond-dust-up-6gqhk0c0h [Accessed 6 August 2019]
41 At Your Service

CONCLUSIONS
There is continued debate about the economic damage In this report we have also identified several areas in which
caused by corruption globally, but what is not disputed is high levels of illicit wealth are handled by those offering
that the amounts easily total tens of billions of pounds per services that are not even subject to AML oversight. Some
year. The loss of public funds and subsequent impact on of the revelations about these businesses’ and institutions’
the provision of basic services – such as health, education involvement in the lifecycle of corruption are only now
and the rule of law – is hard to quantify given the vast being revealed; as such, there is much less understanding
scale of money involved. Whilst this seems like a foreign of the risks they are exposed to compared to those who
problem, we cannot escape that UK services often enable have a legal obligation to identify and report the suspected
this criminality and are the destination of its proceeds. proceeds of corruption. It is important that those providing
these goods and services – for example independent
These are not homogenous villains in suits, hell-bent on schools – are made aware of the potential money
making a fast pound at anyone’s expense, but rather laundering risks they are exposed to. More work needs
businesses and individuals that lie across a spectrum of to be done to understand how those offering unregulated
involvement – from the unwitting to the unscrupulous. services can contribute towards the intelligence picture
Understanding the role these enablers play in global and help in the fight against money laundering.
corruption is important to defining targeted interventions
to detect similar behaviour and deter it from happening As the UK seeks to re-negotiate its trading relationship
in the future. In this report, we have sought to provide with the world, these questions become even more
an indication of the breadth of this activity and bring to important. If Britain wants to be a safe, reliable jurisdiction
life some of the realities of what enabling constitutes in in which to do business, and where good governance and
practice. the rule of law are sacrosanct, then it must take measures
to ensure its businesses meet the highest possible
We do not pretend it captures all of the nuances, or even standards. Failing to do so would not only allow corrupt
anywhere near the full picture, but it does provide more kleptocrats to continue plundering public money but would
colour to what has been a stylised debate on this subject. also leave the UK isolated; a rogue haven for dirty money
We also recognise that there that a large proportion of floating off the coast of Europe.
businesses and professionals are extremely dedicated to
doing their bit to help tackle corruption abroad and any
proceeds of such activity that ends up here in the UK. We
are not suggesting from our inquiry that their contribution
is not recognised – it is both welcome and critical.
However, we have felt compelled to shine a light on their
less vigilant and scrupulous counterparts in the absence of
an open debate about these awkward truths.

Though we cannot say for sure what the motivations and

misjudgements are that led to the behaviour described
in this report, we do know what fails to aid greater
compliance with the law. It has been clear for some time
that the UK’s system for overseeing compliance with AML
laws is inadequate. There are 25 different supervisors
tasked with ensuring the private sector adheres to these
rules however this system is deeply flawed. Many of these
bodies act as both regulators and trade bodies for their
industry, leading to obvious and real conflicts of interest.
Furthermore, where wrongdoing is found, enforcement
through both civil and criminal sanctions is low, leading to
a lack of effective deterrent against cavalier AML practice.
This then drives low compliance with regulations which in
turn diminishes the number of actionable reports available
to the police. This system requires a fundamental overhaul
if the UK is to stand any chance of ensuring its private
sector provide an effective frontline defence against dirty
money.
 Transparency International UK 42

ANNEX I: LIST OF UK AML SUPERVISORS

Public sector AML supervisors
1. Financial Conduct Authority

2. HMRC

3. Gambling Commission

Professional body AML supervisors

4. Association of Accounting Technicians

5. Association of Chartered Certified Accountants

6. Association of International Accountants

7. Association of Taxation Technicians

8. Chartered Institute of Legal Executives

9. Chartered Institute of Management Accountants

10. Chartered Institute of Taxation

11. Council for Licensed Conveyancers

12. Faculty of Advocates

13. Faculty Office of the Archbishop of Canterbury

14. General Council of the Bar

15. General Council of the Bar of Northern Ireland

16. Insolvency Practitioners Association

17. Institute of Certified Bookkeepers

18. Institute of Chartered Accountants in England and Wales

19. Institute of Chartered Accountants in Ireland

20. Institute of Chartered Accountants of Scotland

21. Institute of Financial Accountants

22. International Association of Bookkeepers

23. Law Society

24. Law Society of Northern Ireland

25. Law Society of Scotland

43 At Your Service

ANNEX II: RELEVANT TRANSPARENCY

INTERNATIONAL UK PUBLICATIONS
The cost of secrecy: The role played by companies registered in the UK’s Overseas Territories in money laundering and
corruption (December 2018)

In whose interest? Analysing how corrupt and repressive regimes seek influence and legitimacy through engagement
with UK parliamentarians (July 2018)

Accountable asset return: UK country level civil society report by corruption watch and transparency international UK
(December 2017)

Hiding in plain sight: How UK companies are used to launder corrupt wealth (November 2017)

Offshore in the UK: Analysing the use of Scottish Limited Partnerships in corruption and money laundering (June 2017)

Faulty towers: Understanding the impact of overseas corruption on the London property market (March 2017)

Just on paper? Beneficial ownership legal frameworks in BVI, Cayman & Montserrat (December 2016)

Paradise lost: Ending the UK’s role as a safe haven for corrupt individuals, their allies and assets (April 2016)

Don’t look, won’t find: Weaknesses in the supervision of the UK’s anti-money laundering rules (November 2015)

Gold rush: Investment visas and corrupt capital flows into the UK (October 2015)

Empowering the UK to recover corrupt assets: Unexplained wealth orders and other new approaches to illicit enrichment
and asset recovery (May 2015)

Corruption on your doorstep: How corrupt capital is used to buy property in the UK (February 2015)

Closing down the safe havens: Ending impunity for corrupt individuals for seizing and recovering their assets in the UK
(December 2013)
Transparency International UK 44
Transparency International UK
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