UK-registered partnerships reportedly being used to conceal serious financial crime
Thousands of UK-registered limited liability partnerships (LLPs) bear the hallmarks of shell companies used for serious financial crime, an investigation by anti-corruption organisation Transparency International UK has found.
The report, released by the independent anti-corruption organisation, revealed that over 21,000 LLPs – more than one in 10 of those incorporated in Britain – share the characteristics of those used in major corruption and money laundering schemes.
LLPs differ from private limited companies in that they are made up of partners rather than directors and shareholders. Transparency International UK pointed out that many legitimate businesses are LLPs, but this type of company is also attractive to those seeking to move illicit funds because they can be set up in a way that provides multiple layers of secrecy, making it difficult to ascertain who really owns them.
According to the report, 14% of LLPs had one or more corporate partners in one of 21 high-risk jurisdictions, were registered at addresses with hundreds, sometimes thousands, of identikit LLPs, and had partners that were also partners to dozens or sometimes hundreds of other LLPs. It even found 948 suspect LLPs registered at an address in Cardiff, just 100 metres from Companies House.
“This research lays bare the seemingly industrial-scale abuse of UK LLPs and how this type of company has been used to facilitate billions in economic harm,” Duncan Hames, director of policy at Transparency International UK, said. “With a substantial proportion of LLPs showing red flags for use in high-end money laundering, it’s clear that those engaged in corruption and other major financial crimes are one step ahead of the government’s response.
“Key to getting on the front foot is a long-overdue reform of Companies House, effective anti-money laundering regulators, and properly resourced law enforcement that can provide a credible deterrent to economic crime.”
Commenting on the report, another anti-money laundering expert is backing calls for reform of the UK’s company registration system.
Martin Cheek (pictured), managing director at anti-money laundering software platform SmartSearch, said that dealing with the “glaring loophole in our financial system” is long overdue.
“The economic damage caused could amount to hundreds of billions of pounds,” he remarked. “Much of this dirty cash, according to Transparency International, is flowing out of Russia and this is undoubtedly one of the ways that Russians are evading sanctions and helping Putin to finance the war in Ukraine.”
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Cheek is also backing Transparency International’s call on the government to use the Economic Crime and Corporate Transparency Bill – being debated by MPs this week – to reform Companies House, overhaul the UK’s “fragmented and ineffective” system of AML supervision, and create a credible deterrent against those who abuse UK companies for economic crime.