UK Shell Companies Linked To £80bn Money Laundering

[dropcap]H[/dropcap]undreds of British shell companies are implicated in nearly £80bn of money laundering scandals, according to researchers calling for an overhaul of the UK’s “light touch” regulation.

Transparency International UK, a non-governmental organisation, said the UK was home to a network that operated much like the companies at the heart of the Paradise and Panama papers.

Duncan Hames, director, said: “As fingers point to jurisdictions like Panama and Bermuda, it shames the UK that companies are being set up under our noses, with the sole purpose of laundering illicit wealth; money very often stolen from some of the poorest populations in the world, starving them of vital resources.”

Opposition MPs renewed calls this week for the government to force the Overseas Territories and Crown Dependencies to adopt the UK’s system of providing public access to information about who really controls companies.

Transparency International said the UK’s approach constituted “real progress” but threatened to be undermined by lack of checks on the company register and inadequate money laundering supervision.

It also said the UK had insufficient controls when it came to setting up companies: “There are practically no barriers to UK companies being incorporated by money launderers and no way of tracing their use after they have been established.”

Arguments about the effectiveness of the UK’s approach to regulation have been a big issue for offshore finance centres in recent years as they have come under pressure to open up company ownership registries to public scrutiny. The Cayman Islands, for example, has branded the UK’s transparency drive as “pointless” because it does not require the information on the register to be verified. It said it had a better system because it required company service providers to collect and verify the information.

Transparency International said it had found 766 companies registered in the UK that had been directly involved in laundering stolen money out of at least 13 countries. These companies are used as layers to hide money that would otherwise appear suspicious, and have the added advantage of providing a respectability uniquely associated with being registered in the UK

It described the UK’s defence mechanisms as “woefully inadequate” with just six staff in Companies House policing 4m companies. Trust and service company providers had a poor record of identifying and reporting money laundering with only 77 of the 400,000 suspicious activity reports filed last year coming from this sector.