Corporate registers and the veneer of transparency

The government is being asked to require British Overseas Territories (BOTs) to open up their corporate registries to the same standard as Companies House (see: Anyone who reads my ramblings will already know what I think of that decision but I want to analyse it in a bit more detail through the use of a case study to highlight why I think it is, currently, a helpful step in the right direction but by no means a complete answer.

First of all, which territories are affected by this potential change?

1. Bermuda

2. Cayman Islands

3. Turks and Caicos Islands

4. British Virgin Islands

5. Anguilla

6. Montserrat

7. Pitcairn, Henderson, Ducie and Oeno Islands

8. Falkland Islands

9. British Antarctic Territory

10. South Georgia and the South Sandwich Islands

11. St Helena, Ascension and Tristan da Cunha (including Gough Island Dependency)

12. British Indian Ocean Territory

13. Gibraltar

14. Sovereign Base Areas, Akrotiri and Dhekelia (on Cyprus)

Of those, the ones that would be most affected (from our point of view) are Cayman and BVI as they have, far and away, the largest number of registered entities.

Why am I so bothered? Because it is replacing the equivalent of Harry Potter’s Invisibility Cloak with Teresa May’s Respectability Cloak. It looks good but still allows criminals to hide.

Let me explain why.

First of all, we need to draw the distinction between good honest people who have nothing to hide and the criminals for whom anonymity is everything.

The former will fully disclose their details when obliged to do so, the latter won’t. So, if the system is to work, and if we accept that criminals will always try and circumvent it, we need to find a way of making it difficult to the point of impossible to use UK legal entities as a vessel for their money laundering.

Let me give you a concrete example (although, just to be clear, there is absolutely no suggestion that the example I am going to show you is actually being used for criminal purpose, it simply highlights how easy it is to circumvent the transparency obligations).

The company in question is called Delta Investment LP. It is a Scottish Limited Partnership (which means, unlike English, Welsh or Northern Irish Limited Partnerships, it has separate legal personality).

It was registered on 5 December 2014. It declared Corporate Management Ltd as its General Partner and Capital Consortium Ltd as its Limited Partner. Although it does not say anywhere on the form where these firms are located, it was signed by someone called “S. G. Cox” who also signs on behalf of the two firms with the same names which are designated members of a number of LLPs (e.g. Exoglobe LLP) with the same address in Mahe, Seychelles (not a BOT).

On 27 November 2017 the two partners resigned and were replaced by Bondwest AG and Entervox AG, both of which are based in Majuro, Marshall Islands (not a BOT).

On 12 February 2018, they appointed Wallbridge Logistics LP as a new General Partner and at the same time, nominated them as their “Person with Significant Control” (PSC).

This isn’t much help as, clearly, Wallbridge Logistics LP is also an entity (and, as it is also a SLP, it has legal identity). So now we need to look at the ownership structure of Wallbridge to discover who is the natural person with significant control.

Wallbridge Logistics LP was registered on 1 March 2017. It appointed Dexberg Inc as General Partner and Montbridge Inc as the Limited Partner both of which have the same registered address as Bondwest and Entervox.

But, of course, Wallbridge also needs to nominate a PSC so let’s keep looking.

On 20 December 2017 it appointed five (and that number is significant) new general partners whilst at the same time retiring Dexberg. The new partners were:

·        Wiltron Nordic LP (replacing Dexberg)

·        Neocom Development LP

·        Cordlex Export

·        Lordhouse Development LP

·        Yardmile Development LP

Of those five, two are UK (but not Scottish) limited partnerships, namely, Wiltron Nordic LP and Lordhouse Development LP.

So let’s have a look at the two UK entities (you might find the graphic that follows rather helpful at this stage):

Wiltron Nordic LP was created on 26 September 2015. It has two partners, Logoform Corp (General Partner) and Hillmont Inc (Limited Partner). Both are based in Nevis (not a BOT).

Lordhouse Development LP was created on 20 October 2015 and has two partners, Tallberg Ltd (General Partner) and Uniwell Inc (Limited Partner) both based at the same address in Nevis as Logoform and Hillmont. All of them have regularly filed accounts for UK entities signed by Ali Moulaye.

As for the other three, I can’t find any information about them at all.

Of course, the fact that Wallbridge has five general partners means that they do not need to declare a PSC as control is deemed to be at the 25% level and five means each has 20%.

Depressingly, it is entirely plausible that the same person has 100% ownership and control of every one of the entities in this ownership chain and yet, without contravening any rules, they have completely circumvented the point of the requirement (i.e. to name one or more verifiably human beings who actually own or control Delta Investments LP).

So am I pleased about the new requirements for transparency registers in BOTs? Well, yes to a degree. Better that these sunny places let the sun shine on their corporate registers rather than keeping them (and us) in the dark but will it make much difference in at least one area of the battle against high end money laundering?

No I don’t think so.

Even more dangerously, removing the invisibility cloak and replacing it with a respectability cloak adds a veneer of transparency that may, ultimately, prove more valuable to the criminals than the crime fighters.

One thought on “Corporate registers and the veneer of transparency

  1. I have just today discovered The Dark Money Files podcast and have ended up at this blog post. I have lots of questions about it. Here goes…

    Why don’t relevant Parliaments introduce legislation to do any of the following:
    remove the separate legal personality property of a Scottish Limited Partbership;
    insist on proof of identity of natural persons with significant control (you even need to provide ID to join the library!);
    reduce or remove the 25% threshhold that defines ‘significant control’;
    make SLPs available only to permanent residents of Scotland;
    require annual accounts (if I understood the pobcast correctly, these are not required at present).

    Apologies if you have already answered these elsewhere. If so, where?

    Really enjoying the explanations (re Deutshe Bank) on the podcast. Thanks!


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