Nearly 18 years ago, Cocaine Limited was registered at Sandtoft Close in Lincoln. It specialises in the production of soft drinks, mineral water and other types of bottled water.
The company’s director, Mr Jebaraj SCREW YOU, appears to be a busy man. He runs five other companies including: Bribery Limited, Bad London Limited, Corruption Limited, I am Bad Limited and London Fashion Industry Limited.
SCREW YOU is, of course, an unlikely surname. Companies House records show that the businessman has changed his name a number of times – from Jeb Kenneth to MR Jeb Kenneth Screw You and finally settling with Jebaraj SCREW YOU.
Intentionally providing Companies House with false information is against the law, but if you dig around for ten minutes on the register, you’ll find all sorts of questionable officer names and strange sounding businesses.
Pablo Escobar is currently running a British company that specialises in the sale of textiles, clothing, fur, footwear and leather goods. A Saudi Arabian national called Donald Duck has been operating an advertising agency out of a Turkish restaurant in Eltham (staff at the restaurant told The Fence they have no connection to Mr Duck).
While there is nothing to say that a real Pablo Escobar hasn’t incorporated a company in the UK – and the electoral roll does show that there are a handful of Pablo Escobars living in the country – other names are undeniably false. Companies House records include officers called Mmmmmmm YYYYYYYYYYYYYYYYYY, Jet XXX, and Richard Identity Fraud Found Via These Details! WELCH.
If you want to set up a British company you have to pay £12, and provide three pieces of personal information, such as your town of birth, mother’s maiden name and telephone number. You’ll also have to provide your name and address.
Then you’ll have a bona fide British company in just 24 hours. There is no verification process to make sure that the information you provide is correct.
‘At present we have limited powers to verify the accuracy of information that is provided to us,’ a spokesperson for Companies House told The Fence.
The spokesperson explained that Companies House works closely with UK law enforcement bodies and routinely shares intelligence with them. This includes information that they have received or identified that may indicate suspicious activity.
But Ben Cowdock, of Transparency International UK, claims that weak controls on who can form companies and lack of checks on the information submitted to Companies House has contributed to British firms becoming the ‘getaway vehicle’ for fraudsters and organised criminals.
‘Until this situation is addressed, through verifying company information and clamping down on rogue formation agents, the UK’s name will continue to be tarnished by the shell companies registered here being used in crime,’ Cowdock says.
Perhaps it is unsurprising, then, that suspicious sounding businesses on the register sometimes have links to fraud and money-laundering.
The Fence came across one company called ZZZZZZZZZZZZZZZZZZZZZZZZZZZZZZZZZZZZZZZZZZZZZZZZZZZZZZZZZZZZZZZZZZZZZZZZZZZZZZZZZZZZZZZZZZZZZZZZZZZZZZZZZZZZZZZZZZZZZZZZZZZZZZZZZZZZZZZZZZZZZZZZZZZZZZZZ LIMITED that lists its office address as 78 Montgomery Street in Edinburgh.
According to a report by The Herald, this terraced house with a small, overgrown garden, is one of ‘Europe’s great money-laundering hubs’ and shell companies registered to the address have been implicated in the multi-billion-dollar Russian Laundromat scheme. Both active and dormant companies still use this address, though when pressed for comment, the owner of the property, a Mr John Hein, said ‘my lifestyle is not of a multi-million-pound criminal.’
In 2016, a network of phantom companies with reported combined assets of over £13 million were ordered into liquidation by the High Court.
The reported assets supposedly included over £1.6 million in cash, with the companies run solely as vehicles for fraud to obtain credit by filing false accounts and other false information.
Two of these companies, 3D Media Ltd and Hydro Serv Ltd, listed their registered office address as 20-22 Wenlock Road, London: the same address for a formation company called Made Simple, though there seems to be no further involvement between these three entities.
However, The Fence asked Made Simple about their vetting process after learning that they are currently providing services for a company called HAHAHAHA LTD.
‘At present, we run more checks than Companies House,’ Made Simple said.
‘We are audited by HMRC regularly to ensure compliance and to quote the audit report, HMRC are ‘satisfied that the business has been able to demonstrate its understanding of, and compliance with, the Money Laundering Regulations 2017’.
‘In regards to the actual naming of the company, we have no input into what customers choose to name their business.’
Fraudsters who game the system by providing false information on the register have been doing particularly well during COVID-19. An article by BBC News told the story of Mark Telling, whose identity was used by a criminal gang to set up a company and take out a £50,000 government loan.
This is not an isolated incident. The BBC found that criminals are setting up fake businesses on an ‘industrial scale and successfully applying for government-backed COVID emergency loans’.
Just how badly the public purse has been hit as a result of false information on Companies House is hard to say. But an investigation into Bounce Back Loans by the National Audit Office published in October last year estimated that the government faces a potential loss of £15 billion to £26 billion through businesses not being able to repay the loans and fraud. The loophole will no doubt play a part in these losses.
Such widespread misuse of the register is hard to ignore. The government announced in September 2020 that it would reform Companies House and ‘clamp down on fraud and money laundering’ with rules that will make identity verification compulsory before a director is appointed.
Under the new system, identity verification will take place through a ‘fast, efficient, digital process’ that is expected to ‘take a matter of minutes’.
Three consultations on reforms to the register were run from 9 December 2020 to 3 February 2021– and the government has said it will be making announcements on plans for reform in ‘due course’.
At the helm of the reforms is the Minister for Corporate Responsibility, Lord Callanan.
In a statement Lord Callanan came out with fighting talk, saying that ‘mandatory identity verification will mean criminals have no place to hide – allowing us to clamp down on fraud and money laundering and ensure people cannot manipulate the UK market for their own financial gain’.
Lord Callanan’s determination to tackle the misuse of Companies House by fraudsters and organised crime is certainly admirable.
However, there have been questions around his suitability to lead the way in improving corporate transparency in the UK. For example, not everyone is happy with his previous business interests.
The Times revealed that Lord Callanan is a former director of a company called AQUIND Limited which is making a bid for a £1.2 billion project to connect the British and French power grids via a cable across the Channel.
The company, which has donated more than £242,000 to the Conservative party, obscured its controlling party using exemption regulations – where Companies House agreed that the individual had shown they were potentially at ‘risk of violence or intimidation’ if they were named. Though according to the Times, the controlling party requested the exemption after Callanan resigned.
Susan Hawley, executive director of the campaign group Spotlight on Corruption, told the Times that Lord Callanan’s connections with a ‘Russian-linked company that obscured its controlling party did not bode well for him fulfilling his brief to promote transparency in the energy industry’.
The ultimate owner of AQUIND Limited was eventually revealed to be Viktor Fedotov, a Russian tycoon who was the chairman of a company in Russia that was alleged to have been linked to a corruption scandal according to the Bureau of Investigative Journalism, though there is no suggestion that AQUIND limited is anyway corrupt.
The Fence learnt that Lord Callanan is currently the director of another company called M C Associates (Europe) Ltd – which is listed as being active on Companies House.
Lord Callanan’s directorship of M C Associates (Europe) Ltd, hasn’t been mentioned in the Register of Lord’s Interests since 2018, despite the code of conduct in the upper house stipulating that it should have been included.
‘We were told that the company had ceased trading on 14 June 2017’ the Lords’ Registrar’s office told The Fence.
‘When interests come to an end, we mark them as having ceased and take them out of the Register altogether after a year.
‘On this occasion, we mistakenly thought that the company had been wound up and therefore removed it from the Register a year after we were told it had ceased trading (15 June 2018).
In fact, although it had ceased trading, it is still registered with Companies House. We have therefore restored it to the Register of Lords’ Interests,’ they said.
These sorts of concerns aside, there is cautious optimism from MPs for the reforms to Companies House.
Dame Margaret Hodge, Chair of the All-Party Parliamentary Group on Anti-Corruption and Responsible Tax, told The Fence that they are a long overdue step in the right direction which will help to limit the abuse of UK corporate structures.
‘The reforms should bring accurate and verified company records to go with our already world-beating transparency standards. As always, the devil will be in the detail.’
We’ll have to see whether the new rules will be effective. Perhaps, as Lord Callanan said, compulsory verification will mean that criminals have no place to hide. As it stands, things can only get better.
The benefit of such reform would be far-reaching. It would help tackle illicit flows of unexplained wealth into our country, and kleptocrats might be stopped in their tracks. But more importantly, those businessmen with strange-sounding names would finally feel vindicated. Donald Duck could run his advertising business from a Turkish restaurant undisturbed. The Fence likes to imagine him submitting his passport scan to Companies House and exhaling with relief. ‘Finally,’ he would think, ‘people will know I’m the real deal.’