Imagine a world where every person was required to have a self-closing screen in front of their front door. One which was opaque so, once past it, any would-be burglar would have the requisite cover to break in without being observed.
And which would also deny any passer-by the opportunity to notice the door had been forced and a potential crime either in progress or having taken place.
How much of the crime that is currently reported to the police is done so by good citizens who understand it is their duty, when witnessing criminal activity, to report it?
Imagine a world where the only potential to report crime was by the person who suffered it, or proactive action by the police themselves. What is the likelihood of having enough police on the beat to check each and every door to see if it is secure. It’s impossible.
And yet, this appears to be the argument for those who would require corporate registers to be available solely to those who inhabit them (and then only their own specific entry) and those who have responsibility for policing them.
The constant refrain is that the registers are made available to the duly authorised officials if the entries are required to be inspected as part of a wider investigation. But this misses the point. Often the wider investigation is initiated by observed irregularities or idiosyncrasies in corporate information. And if that information is hidden from view, who has the wherewithal to mine thousands, hundreds of thousands or, as is the case in the UK, millions of legal entities?
Certainly not the police.
And then comes the refrain “But your information in the UK is rubbish. At least we have more robust regulation in our jurisdiction so we have much higher quality information.”
To which I have a number of responses.
- We only have your word for that.
- You are confusing regulation of covered entities with the broader requirement to hold a central registry of all legal entities. That’s not the same thing
- The groundswell of public opinion to improve the quality of all legal entity data held by Companies House is a result of the transparency of the register. Transparency is the progenitor of quality. We can test the quality by being able to access the data.
- Our transparent register, warts and all, eventually fails us because the bad actors use it as a conduit to secrecy locations. We help to enable “snow-washing” by being an intermediate (although public) step in a path that leads to a locked door behind a screen.
Let me give you a real example.
EFK Universal LLP is a UK entity whose data is freely available through the companies house website. It is an active company which last filed on 7 December 2018. It is on its third set of designated members. The first pair were located in Belize. The second pair were located in Seychelles, the third (and current) pair are located in Nevis. No prizes for guessing what they have in common.
But, you will say, they are just responsible for administering the partnership, they are not necessarily the owners.
To which I might respond that, given they have legal responsibility for the accuracy and veracity of the company records, knowing who they are (rather than just an anonymous entity) would be a good thing.
But lets leave that to one side for a minute. UK law requires them to declare a PSC (Person with Significant Control). And they do. It’s Walkstreet Organization Ltd (who are what is known as a Relevant “Registrable Legal Entity” or RLE by virtue of being a UK Limited Company subject to the same transparency regime). Hooray.
Although it’s worth noting that Walkstreet Organization is (or has been) PSC to forty five other UK LLPs. Which is quite a lot of different and very diverse companies of which to be the owner. Particularly as the latest accounts filed by them (which of course I have access to) show current net assets of £2,775.
But, by the by. The point here is that Walkstreet must itself disclose who its owners are. And the owners of Walkstreet will be the ultimate owners of EFK given that they’ve declared Walkstreet as its PSC.
Except Walkstreet says it doesn’t have a PSC.
Why?
Again, looking at the publicly available filings, I see that it has filed a Confirmation Statement, disclosing that it has five shareholders. And none of them reach the requisite level of owning more than 25% which would make them a PSC. How convenient.
They are:
- SND Development LP
- Sidney Transit LP
- Cliffmount Properties Limited Partnership
- Vectorex Inc
- Translex Commerce
Leaving to one side that I’m not convinced a standard limited partnership can, of itself, be a shareholder (as it does not have legal personality) lets have a look at each in a bit more detail.
SND Development is an English Limited Partnership (and therefore does not have a PSC requirement) but it does have two partners. They are egal entities based in Nevis.
Sidney Transit LP is a Northern Irish Limited Partnership (and therefore does not have a PSC requirement) but it does have two partners. They are legal entities based in Nevis (but not the same ones as SND Development LP).
Cliffmount Properties is a Canadian Limited Partnership and, other than its address, I can’t tell you anything more than that (and I only know that because they included it – which they are not obliged to do – on a filing for another Scottish Limited Partnership)
Vectorex Inc is a legal entity based in Dominica and I can’t tell you anything more than that (and the only reason I know that is because it appears on their corporate stamp when they have signed on behalf of other UK Limited Partnerships).
Translex Commerce is based in South Africa and I can’t tell you any more than that, other than its address that (and I only know that because they included it – which they are not obliged to do – on a filing for another Scottish Limited Partnership). There is the opportunity to purchase a report for LexisSA but I believe you have to have a South African credit card or bank account to do so.
So there we are. A UK legal entity which ultimately resolves to a whole variety of other different entities (some legal and some partnerships) none of whom are in locations which are transparent.
And hence we have this idea of “snow-washing”. The ability to present yourself as operating from a well regarded jurisdiction when in reality, you are doing nothing of the sort.
It could well be the case that every single one of those entities was controlled by the same person but, without transparency, we will never be any the wiser. And they will have avoided the UK disclosure requirements.
And if anyone reading this thinks that this is ever likely to be investigated by law enforcement officers (other than as a consequence of this article) think again. There are THOUSANDS of similar cases in Companies House (and elsewhere – New Zealand for example). They have neither the time nor the manpower to do so.
So, what do we want? A Front door in clear view of the general public who, if they see it has been forced open, have the opportunity to inform the police, or front doors behind screens which only you and law enforcement have access to?
Hiding in plain sight - my search for money launderers 