Edinburgh addresses linked to alleged money laundering and tax abuse

TWO Edinburgh addresses are cited as the official headquarters for businesses that use opaque financial structures linked to alleged money laundering and tax abuse, The Ferret can reveal.

The Edinburgh Office, a company formation agent, which forms and registers companies for individuals, is linked to thousands of Scottish Limited Partnerships (SLPs) for clients from around the world.

Its two properties in Scotland’s capital are used as the registered addresses for SLPs linked to an ongoing embezzlement case involving the Ukraine mafia. The Edinburgh Office has also incorporated companies allegedly linked to tax avoidance.

Some SLPs have been linked to criminal activity in the past which prompted the Scottish Government to ask the UK Government to reform laws.

Money laundering regulations from 2017 require company formation agents to “establish and maintain policies, controls and procedures to mitigate and manage effectively the risks of money laundering and terrorist financing”.

The Edinburgh Office has lawfully used 101 Rose Street South Lane as the registered address for around 2000 companies. The agent told The Ferret that it makes the required checks on people wishing to start SLPs but knows nothing about the subsequent use of companies it registers.

The other Edinburgh Office base is at 64A Cumberland Street, which is home to another 300 firms. Many were created by other companies registered in offshore jurisdictions such as the British Virgin Islands or the Seychelles – making it virtually impossible to know their real owners.

Experts say the value of these addresses comes from the privacy they provide and the reputational value of being a UK-based business.

The Edinburgh Office’s website invites clients to “portray a professional image and create the impression of an established business with its own premises”. It charges £50 a year for a company and its director to use addresses in the capital.

“Keep your work and home lives separate and protect your privacy by ensuring your residential address stays off the public record with our Director Service Address,” the website says. Other services include forwarding clients mail for £170 a year, while a call-answering service costs £200 a year. Meeting rooms for client use are “coming soon”.

Concerns have been raised in recent years that some SLPs have been used for illegal activity. Alex Cobham, CEO of the Tax Justice Network campaign group, said: “The abuse of SLPs is rife, but of course that’s exactly what you’d expect from making available such opaque, badly regulated legal entities in a broadly reputable, high-income jurisdiction.”

He added: “There is no valid reason for SLPs to exist. For them to be allowed to continue, when they put Scotland at the heart of so many international criminal flows including tax abuse, is shameful.”

The Edinburgh Office is the Scottish subsidiary of Registered Office (UK) Ltd, another company formation agent, which both forms companies and can provide registered addresses.

The owner of both firms is 53-year-old Elizabeth Sharpley. She declined to comment but sent The Ferret’s query to “Claye G”, the office manager of sister company the London Office, also a subsidiary of Registered Office UK Ltd.

Claye G – who declined to give his surname – said the firm requires “photo ID and proof of address taken within the last three months” to ensure the legitimacy of clients. No further checks are made after a company is formed, he said, adding: “We do everything that we are able to, but in the future I know there are plans to expand this.”

Foreign firms linked to The Edinburgh office include Monter Impex and Solter Management. They are two entities based in the Seychelles which own dozens of UK companies, many of which are registered at Edinburgh addresses provided by Sharpley’s companies.

They use the UK’s company formation laws to create “shell” and “shelf” companies. Shell firms can be used to protect the anonymity of the individuals who use them and can be used for a variety of reasons, from tax avoidance to money laundering.

Shelf companies are created and lay dormant before being sold to those seeking a company they can use to make an anonymous transaction.

Experts say UK laws and a lack of oversight make the country particularly welcoming of these practices, especially SLPs in Scotland.

A 2017 report from Transparency International said that in 2016 alone more SLPs were incorporated than all previous years combined since they were introduced in 1907.

“Whilst SLPs make up a tiny fraction of entities in the UK – 0.32% of the businesses registered at Companies House as of March 2016 – they made up 22% (161) of corporate vehicles we identified in our open source analysis of UK companies used to launder illicit wealth around the world,” the report said.

Transparency International found that 71% of registered SLPs were controlled by companies based in secrecy jurisdictions – countries like the Seychelles, Belize or Panama where company ownership information is not public.

It is mandatory for these companies to submit names of persons of significant control (PSC) to Companies House. The Ferret spoke to Dr Preet Bhinder, who is listed as a PSC of two companies registered at the Edinburgh office – Great Pharma Line LLP and Oxbond Products LP. Both list Monter Impex and Solter Management as partners and they are registered at 101 Rose Street South Lane, Edinburgh.

Bhinder said Great Pharma Line was owned by a former employer. He told The Ferret: “I didn’t know that my name is still associated with that company because I left quite a long time ago.”

Bhinder added he was “a bit surprised” at his PSC listing, claiming he never had control of the company and was merely an employee of an “associated company” called Geeta Pharma, in Uzbekistan.

VALTON Group LP is another active company registered at The Edinburgh Office’s 101 Rose Street South Lane address. It was incorporated in 2016 with two partners: Solter Management Ltd. and Monter Impex Ltd. Originally registered in Glasgow, Valton Group was transferred to the Edinburgh address in 2017.

The company is the subject of an ongoing case in Ukrainian courts following investigations by Ukraine’s National Anti-Corruption Bureau. In 2017, detectives raided the office of Mayor Gennadiy Trukhanov’s office in the city of Odessa after a firm owned by Valton was used to buy a property it later sold to the city’s council for 46 times the price, The Herald reported.

Claye G said he was unfamiliar with Valton, Monter or Solter and that his company would suspend these companies and remove them from their portfolio, if convicted. The case is ongoing and, on October 6, the Ukrainian prosecutor general announced new charges against Trukhanov.

Richard Smith, a researcher who specialises in global fraud, told The Ferret: “I hope it is obvious to everyone that it is completely impossible to supervise TCSPs [Trusts or Company Service Providers, such as company formation agents] properly, if you can’t tell which companies they are responsible for creating.”

Transparency International UK, said that SLPs “continue to be used to facilitate corruption, fraud and organised crime.”

“Company formation agents are required to carry out checks on their clients, but we see unscrupulous service providers are willing to offer virtual addresses as part of ‘secrecy packages’ to anyone willing to pay,” said Ben Cowdock, investigations lead.

He added: “For SLPs to ever lose their attraction to those seeking to launder the proceeds of crime and corruption, we will need the UK Government to introduce long-overdue reforms to Companies House and a concerted effort by HMRC to crack down on rogue formation agents.”

THE SNP called SLP regulation “a very weak system”. There were “a lot of areas from which the due diligence reports just aren’t coming,” said Alison Thewliss (above), the party’s shadow chancellor.

She added: “There are weaknesses in the system that allow these company formation agents to keep doing what they are doing unchecked, and I think if you’re going to have a [stronger] system, you have to enforce it, you have to have a consequence.”

Thewliss argued companies should lose the ability to operate and register other companies when they fail to perform due diligence checks. “From the number of times that I’ve raised this and my predecessors have raised this, it just doesn’t look like there’s anyone else taking this seriously,” she said.

“And I find that incredibly worrying because it tarnishes Scotland’s good name, and it tarnishes the UK because it is seen as an easy place to launder money,” added Thewliss. “I just find it absolutely baffling that the UK Government don’t care about this.”

A UK Government spokesperson said: “The misuse of Scottish Limited Partnerships by those with criminal intent is appalling. Company formation agents are required by law to register for anti-money laundering supervision, as well as conduct Customer Due Diligence checks.”

They added: “We have announced plans to reform the law on limited partnerships, but we want to go further by reforming the powers of Companies House to give it a bigger role in tackling economic crime.

“Since the tightening of regulations in 2017, new registrations of SLPs have fallen by 80% – but we intend to stamp out misuse altogether.”

The Ferret is an editorially independent, not-for-profit co-operative run by its journalists and subscribers. You can find it at www.theferret.scot and can subscribe for £3 a month here: www.theferret.scot/subscribe