One of the interesting things about Caspian’s Entity Investigator (EI) is its ability to throw up potentially worthwhile subjects for investigation which would not normally be triggered by conventional screening tools. The ability to look for network risk (or, as I prefer to call it “emergent risk”) that is not predicated on specific data points makes for an exceptionally powerful tool.
Emergent properties are fascinating in their own right. Emergence occurs when an entity under observation is seen to have properties that are not present in the individual elements. For example, water (a liquid in its natural state) is composed of hydrogen and oxygen (gases in their natural states).
I think of emergent entity risk in the same way. Individual data points collected about an entity may not, in themselves, raise any red flags. However, when they are linked, especially when that linking aligns them to a broader network, hitherto potentially unobserved risk emerges as the picture forms.
Let me give you a real life example. And as ever, let me also emphasise that risk factors, hover compelling, are not equivalent to accusations of criminality, merely indicators that some thing (or things) has fallen outside of expected norms and is worthy of further investigation or more intensive scrutiny.
This example, thrown up by EI is a UK Limited Liability Partnership (LLP) called Raymar Finance LLP. It dissolved by Compulsory Strike Off (CSO) in 2018 following the expiry of the statutory period for filing its annual return and accounts. It was incorporated in the early days of LLPs back in 2004, long before they had come to the public’s attention for their continued appearance in global laundromat activity.
It was registered to a rather ordinary address (see below) in Battersea, south west London, an address that appears to have been home to well over 1,300 companies over time and is still (according to OpenCorporates) the registered address of more than 100 Limited Companies or LLPs.
At incorporation, Raymar appointed two legal entities to be its Designated Members (DMs) which is the minimum required by law. They were:
- Sunroad Investments Corp, PO Box 346, Corozal Town, Belize
- Management Innovations Ltd, 12 Oliaji Trade Centre, Mahe, Seychelles
Now, you’d be forgiven for thinking that a company which goes to the trouble of appointing designated members in such far flung places and which involves them in some expense to do so, would be looking to trade successfully and profitably.
But you’d be wrong.
For the entirety of its history, Raymar Finance LLP has filed dormant accounts showing no economic activity and total assets of £1 which is, according to its accounts, the amount of cash it has in the bank.
Why then, I can almost hear you asking, has it appeared on the radar of EI?
Because one of the things that EI can do is analyse entities from the UK which have invested in Latvian companies (courtesy of the inward investment database made available by Lursoft) and risk rate them based, at least in part, on the emergent risk created by the network within which it resides.
Which is where the story starts to get a little more interesting.
I’ve already highlighted the fact that Raymar was originally registered to an address with a high incidence of company registrations and we also discover that both Sunroad Investments Corp and Management Innovations Ltd have themselves been DMs to 100 or more UK LLPs.
Not just that but, in 2016, they both resigned and were replaced by two new legal entities (this time, both from the Marshall Islands). They are called Westa Holding Ltd and Holding Associates Ltd.
They are, or have been, DMs to a further 200 or so UK LLPs and are names which appear with some frequency in association with companies investing in Latvia.
You might also wonder why a company would go to the time, trouble and expense of changing its DMs when it is dormant, a question I’m unable to answer.
So can you see how, even at a fairly early stage in this investigation, the original view, based on individual data points was merely interesting (a UK LLPs appointed offshore entities as its members) becomes rather more than that when the underlying network associated with those data points starts to be revealed.
Clearly, one of the most salient points is that Raymar asserts itself to be dormant and without assets but the simple fact that it came up on our list of investors into Latvia would appear to conflict with that assertion.
Indeed, Raymar is not just an investor into Latvia, it is a serial investor into Latvia.
We know from publicly available documents that it has invested in four separate Latvian companies:
- Baltic System Transport SIA (between 2013 and 2017): investment €76,935
- Liepaja Bulk Terminal LSEZ SIA (between 2013 and 2017): investment €83,619
- Transit Service, LSEZ SIA (between 2013 and 2017): investment €374,215
- Transwide Services LSEZ SIA (between 2005 and 2017): investment €1,414,576
This makes a total of €1,949,345 between 2005 and 2017, by which time all the investments had been returned.
Of course, you might expect investments of this size into an emerging economy to be reasonably newsworthy and internet research shows this view to be correct. Here are some of the articles I discovered in relation to Raymar.
- From the Russian language pages of Delfi (a major Baltic news portal):
I think that last sentence is a not entirely effective translation of “they did not require a mortgage to complete the purchase”.
- Firmas.lv – a corporate news provider
This is interesting as it throws a couple of new lines of enquiry into the mix.
First of all, we find another UK LLP involved (although, as it is Welsh it uses the Welsh language alternative to LLP which is PAC). And that brings us to the Persons of Significant Control (PSC) data for these two UK entities which, as we know, is freely accessible from Companies House.
Tennex Inter PAC lists Sergejs Govorovs as its PSC (formerly Vladimir Ryzhakov) and Raymar Finance LLP lists Vladimir Ryzhakov.
Aggregating the different shareholdings itemised in the above article reveals that Sergejs (or Sergei – one is the Latvian spelling and the other the Russian spelling of the same name) has 47.25% in his own name and 18.75% through Tennex Inter Pac, making 66% in total. Vladimir Ryzhakov owns 24% through Raymar and Valentina Babashina 10% directly.
In addition, Mr Govorovs regularly appears on the list of Latvians top 100 richest individuals. It’s also worth noting that, unlike Raymar Finance LLP, Tennex Inter PAC, since the advent of Mr. Govorovs, has seen a significant change in its reporting.
In Mr Ryzhakov’s last year as PSC (2016) Tennex reported commission income of £4,100 on a set of accounts signed by Stella Port Louis (who is noted as being specifically singled out by then Senator Barack Obama for the role she played heading up more than a hundred Wyoming registered companies, although that somewhat pales by comparison to the near 600 New Zealand companies and near 300 UK companies of which she is a director).
The following year, 2017, with Mr Govorovs now in control, the accounts went from 3 to 11 pages and showed interest receivable of £1,073,629 (a magnificent increase). The following year this improved again to £1,338,925.
Meanwhile, Raymar Finance LLP (of which Mr Ryzhakov was still PSC) continued to file dormant accounts until it dissolved in May 2018 and that following the return of €1,082,358 in investments on 3 June 2017 (an event recorded in the Lursoft database). Just to extend our understanding of the “emergent risk”, by the time the company dissolved, the final accounts (still showing zero assets) were being signed on behalf of Westa Holdings by someone called Panagiotis Savva, who also appears, according to OpenCorporates, as director, member or secretary to more than 100 other companies worldwide in places as far flung as Denmark, USA, Panama and the UK. He gives his nationality and residence as Cyrpus.
So there we have it, starting from a single LLP, we discover it has been registered to an address where 100s of other entities are also registered, has had two sets of DMs both in offshore locations and both sets have been DM to 100s of other LLPs, it was strongly related (by co-ownership of several Latvian companies) ) with another UK LLP whose address and officers extend the overall network even further. At least two of the account signatories are themselves officers to hundreds of other companies and a change in the PSC of the second LLP brought about a substantial change in the manner in which it reported its accounts (for the better, I should add).
And that’s what I mean by emergent risk. Let me reiterate once again that none of this means or is intended to mean that these businesses are anything other than completely legitimate. On the other hand, they almost certainly deserve greater scrutiny than a simple check on their individual data elements would suggest.
Establishing the risk presented by ostensibly UK companies (and from many other overtly “lower risk” locations) which, on deeper examination are affectively being operated, controlled and generating income from other, higher risk locations, via complex offshore networks is vital.
Hiding in plain sight - my search for money launderers 