The UK government is coming under pressure to crack down on company registrations amid concerns Britain has become a hub for shell businesses that can be set up cheaply by people whose identity isn’t clear.
The UK has a reputation as a hub for money laundering – particularly “laundromat London” for the vast amount of corrupt wealth parked in the city.
It is an issue that has gained renewed focus this week as Western sanctions failed to deter Russian President Vladimir Putin from deploying forces into Ukraine. Britain’s initial sanctions targeted Russian billionaires with close links to Putin, limiting their access to British markets.
Under UK current rules, anyone can set up a company in the UK for just £12 (US$16), without proof of identity or address. Companies House, the government agency tasked with registering new enterprises, has no jurisdiction, nor the resources to verify the information provided.
Having a UK address potentially makes it easier to set up a bank account, experts say.
“UK companies are a global problem,” Duncan Hames, Director of Policy at Transparency International UK told the House of Commons’ Treasury Select Committee recently.
Transparency International said it had identified 929 UK companies linked to 89 cases of alleged corruption and money laundering worth £137 billion (US$183 billion).
“There are victims right around the world, and the imposition of a rules-based system on all sorts of important security considerations right around the world is undermined because of the ability to use UK companies to get around important rules that are there to protect all of us,” he said.
Around 12,000 companies have been registered in the UK over the past year by applicants using Chinese names, with little or no scrutiny from authorities, according to financial crimes consultant Graham Barrow, who runs the Dark Money website and podcasts. It was unclear how many were legitimate operations.
Concerns were raised in recent UK media reports that nearly 700 registered companies were linked to one address – a flat – in the seaside English town of Weston-super-Mare. Most were established over the past year and have directors with Chinese names with correspondence addresses in China.
Conservative MP John Penrose, the UK government’s anti-corruption chief and MP for Weston-super-Mare, said he was aware of reports about the flat but would not comment about it.
One of the companies registered to the Weston-super-Mare address in October 2021, which lists itself as a textiles agent, gave its China correspondence address as “No. 1, Police Station, Jieji Town, Sihong County, Jiangsu Province”, according to Companies House.
Barrow said there has also been surge in UK registrations of companies with China addresses after Beijing’s order last year to crack down cryptocurrency mining and trading.
“More troubling, some of the companies incorporated have the same name as legitimate Chinese companies, such as the ones you would find on Alibaba,” he said.
People can open a company in the UK with the same name, then open a bank account in, say, Hong Kong using the name of the UK company, he explained.
“If they (the banks) are not very careful where the money is coming from, you could put some of the Chinese companies’ earnings in a UK company account of the same name,” he said.
“The minute you do that you have moved that money from your balance sheet, avoiding exchange controls and taxation on the lot of it. In the UK you just carry on filing dormant accounts and no one is going to check.”
Barrow said he has found 83 UK-registered companies with the word “Chymistry” in them. Every one of them has a director with a Chinese name and 79 of them were registered to just two London addresses.
He also found 67 companies with the word “fertiliser” in the company name, all but one has a Chinese director.
Barrow has built a Google Map showing China locations of dozens of company officers listed on the Companies House website. The listed addresses are in Shibei district, Qingdao in northwest China.
Neither the Chinese embassy in London nor the UK’s Department for International Trade China replied to the Post’s questions about bilateral cooperation on such matters.
The spotlight isn’t only on new companies with China links. Barrow recently found 17 Hungarian “national parks” and “zoological gardens” registered in a small village on the Welsh coast.
The director of a company registered in the northern city of Bradford in 2019, was called Truman Hell Christ, whose listed occupation was “Spypriest”. The company secretary went by the name of Adolph Tooth Fairy Hitler. The firm’s security controller was listed as James Bond.
Entities behind the company have made dozens of changes to the company’s details, including its name since 2019, perhaps as a joke or test. The director’s name as of this month was Miser Lord Truman Michael Scr00ge-Spypriest.
The UK government has itself to blame for the loopholes. It has also failed to account for billions of pounds in its coronavirus loan scheme, much of it said to be lost to bogus companies that pocketed the money.
Last month, Lord Theodore Agnew, a Conservative Party minister at the Treasury responsible for overseeing government efficiency, resigned. He criticised the government for making “schoolboy errors” by giving loans to more than 1,000 companies which were not registered when the pandemic started.
Darren Hodder, a fraud and cybercrime specialist, said up to £33 billion may have been lost.
“It’s bigger than the GDP of many countries,” he said.
Campaigners and MPs wanting to see more stringent company registration measures are pressing for them to be included in a new long-awaited Economic Crime Bill to be included in the next Queen’s Speech to Parliament.
“London’s financial markets are a brilliant economic asset, but also a magnet for dirty cash,” Penrose, the Conservative Party MP, told the Post.
“Their success depends on Britain’s reputation as an honest, rules-based, free-trading country, so anything that corrodes our brand is lethal. The most important change is extra transparency, so anyone who owns UK property or controls a British company will have to come clean about who they really are.”
He said the Economic Crime Bill “must plug legal loopholes so anyone who owns UK property or controls a British company will have to come clean about who they really are and the source of their money, so everyone can ‘follow the money’ and law-enforcement can keep up to date with the criminals”.
One of the proposals being put forward by the UK Parliament’s Treasury select committee is to raise the fee for company registration to £100. This would help cover some costs for background checks.