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The Times view on Britain’s role in money laundering: Dirty Money

29/09/2020

New leaked files have again drawn attention to the ease with which criminals can use UK companies for financial crime

It has come to something when Britain finds itself described by the US Treasury as a “higher risk jurisdiction” alongside notorious financial centres such as Cyprus for its role in global money laundering. No one should be surprised.

The publication this week of more than 2,500 leaked documents, dubbed the Fincen files, confirms what many knew already: that British financial institutions and registered companies play a central role in international financial crime. Indeed, British companies were named more than 3,000 times in the leaked Suspicious Activity Reports (SARs) sent by financial institutions to the Financial Crimes Enforcement Network, part of the US Treasury.

That is more than any other country. This should alarm anyone who cares about Britain’s reputation or indeed national security.

at the heart of Britain’s status as one of the globe’s money-laundering capitals is the ease with which criminals can use UK companies for financial crime. We report today on ComForm Solutions, a company formation agent set up by three former school friends that has created firms subject to 380 SARs by bank investigators.

There is no evidence that the founders of ComForm had any involvement or knowledge of any suspicious activity conducted by their clients. Nonetheless

  • One company was accused of operating a Belarusian pyramid scheme that duped 900 people out of their savings.
  • Another, Intergold, received $1.6 million for confectionery from Turkmenistan’s trade ministry that ultimately ended up in a Latvian bank account.

One problem is there is no requirement for identifiable people to be directors of UK limited partnerships and limited liability partnerships, the vehicle of choice for the world’s money launderers.

In 2016 the government moved to require most British companies to disclose individuals with more than 25 per cent control.

Yet the law contains no verification or enforcement mechanism, and many do not provide ownership information. Transparency International research has found at least 929 UK shell companies implicated in 89 alleged corruption and money laundering cases. This has amounted to about £137 billion globally in potential economic damage.

Some 100 companies mentioned in the Fincen leaks were registered to a property in Hertfordshire, while 36 were registered to a property in Leicester that is home to a cleaner.

A second problem lies in the lack of resources directed towards investigating and prosecuting financial crime.

Last week the share prices of some of Britain’s biggest lenders, including Barclays and HSBC, fell after the Fincen files showed they had continued to do business with customers even after identifying suspicious transactions. That has prompted accusations that banks are turning a blind eye to money laundering, partly because they know there is little prospect of criminal prosecution. The banks argue that when they do inform regulators of suspicious activities, too often nothing happens.

As parliament’s intelligence and security committee warned in its recent Russia report, financial crime has become an issue of national security. Illicit wealth laundered in London is being used to interfere in western democracies and undermine the rule of law. The government needs to push ahead with its overhaul of Companies House, announced last week.

Indeed it should go further and require at least one director to be a named British resident.

It should also press ahead with a planned bill to outlaw the ownership of UK property by anonymous companies in secrecy jurisdictions.

And it needs to reform Britain’s outdated corporate liability laws to give prosecutors greater powers to go after companies as well as individuals. If global Britain is to prosper, it needs to be a good global citizen.

https://www.thetimes.co.uk/article/the-times-view-on-britains-role-in-money-laundering-dirty-money-bs60mlb5c?shareToken=fb5dd32574fc033b184cd38bef7e3d48