It is so easy to set up a company with hidden ownership inBritain that even a dead man can do it. Global Witness’snew investigative report
shows the poten-tial or companies in the UK, New Zealand and elsewhereto be used as cover to launder the proceeds o corruption,tax evasion and other crimes.It is based on an investigation into a Central Asian bankat the centre o major money laundering allegations, butthe ndings are much broader, highlighting the shockinginadequacy o how some o the world’s major economiesmonitor the registration o companies.Kyrgyzstan’s largest bank, AsiaUniversalBank (AUB), wasnationalised and ound by the authorities to be insol-vent ater a revolution overthrew the regime o PresidentBakiyev in April 2010. The new Kyrgyz authorities allegethat AUB was engaged in large-scale money launderingand an independent audit by a multinational rm sup-ports these claims. However, the bank’s ormer manage-ment deny the allegations and claim that the new regimeillegally expropriated AUB because it was a successulbusiness and that their indictments by the new authori-ties are politically motivated.To get beyond these contradictory claims, Global Witnessinvestigated dozens o companies that held accounts atAUB, many registered in the UK, and ound signicantindicators that suggest money laundering: hundreds o millions o dollars seemed to be moving through theiraccounts while they were not engaged in any real busi-ness activity.In the most egregious example, the shareholder o oneUK company was a Russian man who had actually diedsome years beore the company was registered. His iden-tity had been used to hide the real owner o a companythat appeared to have US$700 million owing throughits account at AUB while doing no business in the UK andailing to le accounts with the UK corporate registry asrequired. It is scandalous that lax oversight and enorce-ment over company registration in the UK allows suchbehaviour to prosper.Many o the companies in this report, even i incorpo-rated ‘onshore’, eature shareholders and directors romoshore jurisdictions such as the British Virgin Islandsand the Seychelles. But these are not the companies’ trueowners. They are employees o corporate service provid-ers who are paid, quite legally, to pimp their identity as‘nominee’ shareholders and directors, in eect hiding theidentity o their customers: the real owners o the com-pany. Technically, police and tax authorities can requestcompany ownership inormation, but i it is cross-borderthe legal processes are cumbersome and the investiga-tors have to know what they are looking or – a
system that does nothing to prevent money launderingand other criminal misuse o these companies in the rstplace. The corporate service providers who set up these com-panies and act as nominees are already required by theanti-money laundering laws to identiy who they are act-ing or and to report any suspicions to the authorities.But the UK, like many countries, currently does little toenorce this existing standard; it is time it did so.
Global Witness believes a urther dramatic changeis required: the identities o the real, ‘beneicial’owners o all companies should be publicly availa-ble in the country they are incorporated, and nomi-nee directors and shareholders should be held liableor their clients’ actions.
The EU has the opportuni-ty to take the lead on this over the next 18 months as itupdates its anti-money laundering laws.This matters because ‘shell’ companies – entities that arelittle more than just a name on a piece o paper – are keyto the outow o corrupt money that keeps poor countriespoor. Those who loot state unds through corruption ordeprive their state o revenues through tax evasion needmore than a bank: they need to hide their identity behinda corporate ront. Countries such as the UK might have acompany registry and consider themselves ‘onshore’, butas long as they only collect shareholder inormation, theyare eectively permitting hidden company ownership –which means they are as oshore as any palm-ringedisland and will continue to acilitate corruption, tax eva-sion and other crimes. This needs to change.The report also shows how:The Kyrgyz economy ell into the hands o just a ew×men, with up to US$64 million in state unds, includingpension unds, potentially missing rom AUB. MaximBakiyev, the son o the ormer Kyrgyz president wasriends with AUB’s chairman, and is suspected by theKyrgyz authorities o being involved. Meanwhile, Maximhas claimed asylum in the UK, saying that is being madea scapegoat by the new authorities in Kyrgyzstan.The billions o dollars in suspicious transactions that×apparently moved through AUB could not have beentranserred without the help o AUB’s relationshipswith banks abroad – called correspondent relationships.Though Swiss bank UBS was sufciently concerned about
AUB to close its correspondent account, others kept theirdoors open. The largest amounts o money rom AUBwent through Citibank in New York, the UK’s StandardChartered and Austria’s Raieisen Bank. Global Witnesshas asked these banks what anti-money launderingchecks they did on AUB; Citibank didn’t reply, the otherscouldn’t comment due to client condentiality.AUB’s international reputation was helped by the pres-×ence o three ormer US Senators, including ormer presi-dential candidate Bob Dole, on its board.
April 2010, Protestors try to storm the Kyrgyz White House, but what was happening to the money in Kyrgyzstan’s largest bank?Photo: Vyacheslav Oseledko/AFP/Getty Images.