Study: How the corrupt launder their money in the UK
They spend it on luxury properties, jets and superyachts, or simply on tuition fees so their offspring can study at prestigious private schools and universities. A study by anti-corruption campaigners Transparency International has shed new light on the UK as a hub for the corrupt and their wealth from around the world.
The analysis of more than 400 corruption and money-laundering cases, involving more than US$400 billion, shows how nearly 600 UK businesses, institutions and individuals have helped corrupt individuals – both unwittingly and sometimes knowingly – move and shield their ill-gotten gains, Transparency International said.
In many cases, the money was channelled through companies in the UK or its offshore financial centres and then recycled in Britain’s economy, with luxury goods and services firms, law firms, banks and accounting firms playing a key role.
The study details how the UK’s property market in particular had become a prime destination for corrupt individuals and other criminals to launder their stolen funds, often in combination with shell companies registered overseas.
Transparency International recommends public registers to make the owners of offshore entities more transparent, noting that in October the Cayman Islands committed to introducing such a register from 2023.
UK companies also feature heavily in the corruption and associated money-laundering cases because of the UK’s hitherto laissez-faire approach to company incorporation.
More than 2,100 UK and overseas companies were directly involved in the corruption cases and an additional 17,000 UK-based legal entities featured at least one officer who had been found to be involved in economic crime. More than a third of these entities used nominee directors registered at just 10 English addresses. As a result, only a handful of people signed off hundreds of accounts for UK companies linked to money laundering and corruption.
The study stated that Companies House does not have adequate resources or powers to sufficiently monitor and ensure the integrity of its company register. “This allows corrupt individuals and their agents to abuse UK companies for criminal purposes, and inhibits businesses’ ability to identify and report suspicious activity to law enforcement,” the report said.
Duncan Hames, policy director at Transparency International UK, said in a press release, “We’ve known for a long time that the UK’s world-class services have attracted a range of clients, including those who have money and pasts to hide.” The new study should act as a wake-up call for government and regulators to deliver money-laundering reforms, he added.
A lack of anti-money laundering supervision is also an issue for many types of non-financial businesses. Services such as private education, architects and interior designers, and public relations firms simply fall outside of anti-money laundering rules.
This means they are under no obligation to carry out checks on their clients or their sources of wealth, allowing corrupt individuals to spend their money with impunity, Transparency International said.
For instance, the study found that more than US$5.2 million in suspicious funds were paid to 178 different UK educational institutions from the various money-laundering operations exposed by the Organised Crime and Corruption Project and its partners.
This cash had found its way to prestigious independent schools like Charterhouse and Harrow, and world-class universities including University College London and the University of St Andrews.
A total of US$10.5 million was paid to 37 UK architectural and interior design firms from anonymous shell companies with Baltic bank accounts, the study said, noting, “Corrupt individuals may contract these businesses to carry out work on property they own to increase its value and launder money at the same time.”
The organisation is therefore calling for a radical overhaul of the UK’s anti-money laundering supervisory regime to establish a credible deterrent against British firms turning a blind eye or actively helping corrupt individuals.
Daniel Bruce, chief executive of Transparency International UK, said while government and law enforcement agencies had made real progress in recent years to reduce the places for corrupt individuals to hide, “our findings confirm it is still far too easy for criminals and the corrupt to seek impunity with the assistance of UK businesses”.
He added, “Despite the dedication of many committed professionals in the fight against corruption, there remains too much poor practice to be able to assume bad behaviour is confined to a few rotten apples.”
Transparency International said that its study was only able to identify a small piece of a much larger puzzle, because much of the activity it investigated is shrouded in secrecy. The true involvement of UK firms and institutions was likely to be far higher.
In many cases, the money was channelled through companies in the UK or its offshore financial centres and then recycled in Britain’s economy, with luxury goods and services firms, law firms, banks and accounting firms playing a key role.
The study details how the UK’s property market in particular had become a prime destination for corrupt individuals and other criminals to launder their stolen funds, often in combination with shell companies registered overseas.
Transparency International recommends public registers to make the owners of offshore entities more transparent, noting that in October the Cayman Islands committed to introducing such a register from 2023.
UK companies also feature heavily in the corruption and associated money-laundering cases because of the UK’s hitherto laissez-faire approach to company incorporation.
More than 2,100 UK and overseas companies were directly involved in the corruption cases and an additional 17,000 UK-based legal entities featured at least one officer who had been found to be involved in economic crime. More than a third of these entities used nominee directors registered at just 10 English addresses. As a result, only a handful of people signed off hundreds of accounts for UK companies linked to money laundering and corruption.
The study stated that Companies House does not have adequate resources or powers to sufficiently monitor and ensure the integrity of its company register. “This allows corrupt individuals and their agents to abuse UK companies for criminal purposes, and inhibits businesses’ ability to identify and report suspicious activity to law enforcement,” the report said.
Duncan Hames, policy director at Transparency International UK, said in a press release, “We’ve known for a long time that the UK’s world-class services have attracted a range of clients, including those who have money and pasts to hide.” The new study should act as a wake-up call for government and regulators to deliver money-laundering reforms, he added.
A lack of anti-money laundering supervision is also an issue for many types of non-financial businesses. Services such as private education, architects and interior designers, and public relations firms simply fall outside of anti-money laundering rules.
This means they are under no obligation to carry out checks on their clients or their sources of wealth, allowing corrupt individuals to spend their money with impunity, Transparency International said.
For instance, the study found that more than US$5.2 million in suspicious funds were paid to 178 different UK educational institutions from the various money-laundering operations exposed by the Organised Crime and Corruption Project and its partners.
This cash had found its way to prestigious independent schools like Charterhouse and Harrow, and world-class universities including University College London and the University of St Andrews.
A total of US$10.5 million was paid to 37 UK architectural and interior design firms from anonymous shell companies with Baltic bank accounts, the study said, noting, “Corrupt individuals may contract these businesses to carry out work on property they own to increase its value and launder money at the same time.”
The organisation is therefore calling for a radical overhaul of the UK’s anti-money laundering supervisory regime to establish a credible deterrent against British firms turning a blind eye or actively helping corrupt individuals.
Daniel Bruce, chief executive of Transparency International UK, said while government and law enforcement agencies had made real progress in recent years to reduce the places for corrupt individuals to hide, “our findings confirm it is still far too easy for criminals and the corrupt to seek impunity with the assistance of UK businesses”.
He added, “Despite the dedication of many committed professionals in the fight against corruption, there remains too much poor practice to be able to assume bad behaviour is confined to a few rotten apples.”
Transparency International said that its study was only able to identify a small piece of a much larger puzzle, because much of the activity it investigated is shrouded in secrecy. The true involvement of UK firms and institutions was likely to be far higher.