Ghost Story 2 – Grafting for coal in the Donbas

In our recent Buzzfeed news article tracking down Ali Moulaye and exposing a network of similarly constructed UK Limited Liability Partnerships, we highlighted a few of the more egregious uses of LLPs and I promised to write in more detail about some of them.

In my first article (My name is Bond, Prof Bond) I wrote about a UK LLP which was returning annual commission income of a few thousand pounds whilst having made a number of multi-million pound loans to various Ukrainian energy companies.

Staying with both Ukraine and energy, I want to turn my attention in this article to the rather dirtier and more dangerous world of coal in the Donbas.

It’s dirty and dangerous for two reasons.

One: the Donbas (which is an abbreviation for “Donets Basin” the area of Eastern Ukraine under discussion) has been gripped by internal strife since the March 2014 uprising and large parts of which are now the self-proclaimed “People’s Republics” of Donetsk and Luhansk. Sadly, this has been followed by a litany of allegations of bribery, corruption and mob-style behaviour.

Two: due to a long term lack of investment and modernisation (for reasons we will discuss later) the work is also primitive and very dangerous.

I’m not intending on delving in to the politics of this situation by I am interested in why UK LLPs appear to be integral to some of the entities involved in coal mining there.

But first, let’s take a step back.

A question I am often asked is “Why are UK entities so often at the heart of these money-laundering schemes. And, of course, that’s an excellent question. The answer is a little more complicated and comes in a number of parts.

1. UK entities are easy to create. You can create one online in minutes and, providing you have a UK registered address (which can be a PO Box or virtual office address) it doesn’t matter where in the world you are
2. You can designate legal entities as your “designated members” and they can also be registered anywhere in the world – handy if they are in “secrecy locations” which means you can hide the people behind the legal entities
3. Although you are required to designate a “Person with Significant Control” (i.e. name someone who is in charge) there is no real due diligence around this process and a large number of ways of circumventing the rules – more on that later)
4. UK entities are viewed with high regard elsewhere. They add credibility to a legal structure
5. Given all the above, if you were, say, a corrupt politician, who wanted to invest a pile of your corruptly gained money into a large industry so you could cream off the profits but you don’t want anyone to know about it, you can create a UK LLP, make it look like valuable foreign inward investment, hide behind all the elements detailed above and then, because it is a UK entity, open a bank account somewhere else in the world and make it look like you are legally removing the “profits” from your investment when, in fact, you are offshoring your countries hard earned money into a personal account somewhere prior to investing it in, say, high end property in London.

So, with that in mind, back to our story.

Let me say right away that I’m not aligning the story I’m about to relate to all of those factors I’ve just explained, but it’s worth bearing them in mind when trying to understand the specifics of what you are about to read.

In our story, we specifically mentioned a firm called “Renton Resources LLP”. You’ll be pleased to know it’s still going strong having filed its most recent update on 9 September this year. It still has our old friends Tallberg Ltd and Uniwell Inc from Nevis as its Designated Members (both if which are entities that have years of Ali Moulaye accounts behind them, although they have now moved on to Kang Dong-Hee). Unusually, it has actually named a PSC who is identifiably associated with the area in which it operates. Less helpfully, due to the vagaries of transliteration (the process of turning non-western scripts into letters you and I would recognise) the spelling of his name is not consistent.

In Companies House he is recorded as “Oleksandr Melnychuk” although, as can be seen from this article he is more often referred to as “Aleksandr Melnychuk” but also Alexander Melnychuk (see: https://uawire.org/polish-firm-sells-coal-from-donbas-to-italy-and-austria) and Alexander Melnichuk (and the list goes on).

All of which makes the research for someone like me a tad problematic.

By the by, Renton Resources LLP filed accounts on 13 February 2018 as follows:

So what else do we know about this particular LLP?

It has been referenced in a number of articles (see: http://okkupatsiya.net/4641-i-o-glavyi-mintopenergo-lnr-narushaet-zakon/). Intriguingly, one particular article, which has been carried by a number of Ukrainian newaspapers including “epravda” –  https://www.epravda.com.ua/rus/news/2017/08/12/628001/ – have also identified a number of other UK LLPs associated with Mr Melnychuk.

For example (this is from a translated version of the epravda report):

As well as:

So we have a couple more to look at (as well as a hitherto unknown Hong Kong company called “Grecol Ltd”).

We’ll start with the extraordinarily named “British Coal Trade Antrahcit LLP”. It is actually called “Coal Trade Antrahcit LLP” and it was dissolved in December 2017. At the time it was dissolved it had two legal entity Designated Members based (almost unbelievably) in Belize (Trusco Management Ltd and Trusco Secretary Ltd). It’s PSC was Grecol Limited! It did actually return reasonable annual accounts, as per the last set before it was dissolved:

Muskwell Import LLP was dissolved on 18 January 2018. It also had legal entity Designated Members based in Belize (Livorno Holding SA and Verona Inter SA) and a PSC named Ms Liubov Melnicyuk (different spelling of the surname but pronounced the same way as Oleksandr).

Their last set of accounts wasn’t quite so impressive:

There is a bill of lading relating to Muskwell Import LLP available on ImportGenius as the screen grab below shows:

Sadly, we don’t know the currency utilised in this transaction but if we assume it was either roubles or hryvnia (Russian or Ukrainian) 20,475,689.67 equates to £238,404 (RUB to GBP) or £559,881.61 (UAH to GBP) at today’s rates.

Either way, even though this is turnover and not fee income, this one deal makes it look  like Muskwell Import was doing rather more business than its accounts tend to suggest. Particularly as the article above alleges that all the exports from a mine owned by Rinat Akhmetov (who, coincidentally was a friend of the recently jailed Paul Manafort) went through Muskwell Import LLP. Although it should also be noted that Mr Akhmetov has always stoutly maintained the propriety of everything we does and, to date, none of these allegations has been proven.

Let’s see what we can find about Grecol Ltd. It was incorporated in Hong Kong on 22 April 2014 and is listed as “live” on the current registry (source: https://opencorporates.com/companies/hk/2088980). And, other than the mentions in the previously linked articles relating to Coal Trade Antrahcit LLP that’s about it other than the fact that it turns out that Grecol Limited was also the PSC for a Scottish Limited Partnership (I know, unbelievable!!) called Montgowell LP, which was registered on 11 July 2016.

It resigned from the role on 23 October 2017 to be replaced by Mansolution Inc which was registered in Nevis (of all places).

Now, there’s a couple of issues here. Firstly, there is absolutely no sign of Montgowell LP anywhere on the internet. Nor is there for Mansolution Inc.

Nevertheless, the point needs to be made that neither Grecol Limited nor Mansolution Inc are likely to be eligible to be PSCs of a Limited Partnership or a Limited Liability Partnership. The rules state that in order to be a registrable relevant legal entity (RLE) the company must:

• holds its own PSC register; or
• is subject to DTRs (disclosure and transparency rules); or
• has voting shares admitted to trading on a regulated market in the UK or EEA (other than the UK) or on specified markets in Switzerland, the USA, Japan and Israel

Given that neither meet criteria 2 or 3 and there is no suggestion that they have an accessible PSC, it does not qualify as a PSC as it is not possible to ascertain the natural person or persons who own or control the company.

So where does this leave us?

It appears that we have a number of UK LLPs which are involved in the ownership and supply chain for one (or more likely a number) of coal mines located in one of the more politically unstable and problematic parts of central and eastern Europe, their accounts do not tend to match other empirical evidence in relation to their economic activity, the ownership chain is, at least in part, highly obscure and without any apparent economic purpose (why have a Hong Kong company as the PSC of a UK LLP which is operating in some way as part of a Ukrainian Coal Mining concern which has designated members located in Nevis?)

Other than that, it’s all quite straightforward.