Exploitation of UK Secrecy Loophole by Criminals and Sanction Violators

Exploitation of UK Secrecy Loophole by Criminals and Sanction Violators

UK (Parliament Politic Magazine) – Alpha Consulting, headquartered in Seychelles, facilitated the establishment of over 900 UK partnerships that leveraged a secrecy loophole to obscure their true ownership. Among these partnerships, one was implicated in operating an oil tanker for sanctions evasion, while others were linked to various criminal activities.

Alpha Consulting maintains that it consistently adhered to legal requirements. An investigative collaboration, Finance Uncovered, and the Seychelles Broadcasting Corporation scrutinized internal Alpha documents and examined thousands of corporate records to unveil some of the concealed beneficiaries of this offshore firm, based in the Indian Ocean’s island nation.

Exploitation of UK Secrecy Loophole by Criminals and Sanction Violators

In addition to serving individuals within Russian President Vladimir Putin’s inner circle, Alpha Consulting operated as a prolific provider of secrecy services, capitalizing on a significant gap in UK legislation. Some of the partnerships it assisted in forming were allegedly involved in fraud, operating an illicit essay mill, and even interfering in foreign elections.

Yevgeny Prigozhin, the leader of the Wagner Group, who passed away earlier this year, was among those who took advantage of Alpha’s services. His company, Beratex Group Ltd, faced sanctions by the United States in 2019 for acting as a front company that concealed ownership of his private jet and yacht.

Leaked documents, acquired by the International Consortium of Investigative Journalists and scrutinized as part of the 2021 Pandora Papers investigation, reveal that Alpha facilitated the establishment of Beratex in the Seychelles, with the hidden beneficial owner listed as the mercenary boss’s elderly mother-in-law.

Alpha Consulting’s Involvement in Concealing Beneficial Owners

Alpha maintains that it had “never engaged in any business activities” with Beratex.

Leonid Reiman, a close confidant and associate of President Putin, enlisted Alpha’s services. Back in 2006, during his tenure as Russia’s communications minister, a Swiss tribunal discovered that Reiman was the covert owner of a company that received illicit payments.

Despite Reiman’s well-documented ties to the Russian president, the leaked documents indicate that Alpha appointed a director for one of his companies who failed to disclose Reiman’s status as a “politically exposed person.” Such individuals, due to their positions or associations, are at a higher risk of involvement in corrupt activities and therefore require enhanced scrutiny.

Graham Barrow, an expert in anti-money laundering, emphasized that this omission was “hardly an oversight.” Failing to make such a declaration constitutes “a breach of the regulations when knowingly engaging with a politically exposed person,” he remarked.

Alpha’s Role in Assisting Yevgeny Prigozhin and Leonid Reiman

Alpha maintained that it had diligently conducted all necessary checks on Reiman and found no information suggesting his political exposure or involvement in money laundering. The firm asserted that it does not represent clients or professional intermediaries who are found to be engaged in wrongdoing.

The investigation also uncovered that Alpha, led by Russian businesswoman Victoria Valkovskaya, played a role in establishing 927 limited partnerships, accounting for one in every five partnerships registered in England, Wales, and Northern Ireland since 2017.

Limited partnerships, typically formed by multiple individuals to jointly own and operate a business, can be employed to circumvent transparency regulations.

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Limited Partnerships as a Tool for Evading Transparency Regulations

In response to the enactment of a 2016 law mandating disclosure of beneficial ownership or actual control of UK companies, there was a significant upsurge in the registration of limited partnerships, which were exempt from this requirement. 

Subsequently, this obligation was extended to Scottish limited partnerships a year later when it became evident that they were increasingly utilized for money laundering and other illicit activities.

Kevin Hollinrake, a junior business minister, dismissed concerns regarding a legal loophole, stating in the House of Commons that “limited partnerships cannot hold property or assets in their own name.”

However, our investigation reveals that Alpha played a role in establishing limited partnerships that were employed to acquire assets and conceal their true owners. This includes an oil tanker, the Delfi, which caused environmental damage along the coast of Ukraine after a 2019 wreck.

Investigations conducted by authorities uncovered documents identifying the owner of the tanker as a Cardiff-based limited partnership named Mister Drake PC.

Similar to numerous other companies facilitated by Alpha’s services, this entity seemed to have Seychelles-based partial ownership, with an on-paper appearance of a prolific entrepreneur in Luther Denis, who is listed as the general partner of 184 UK limited partnerships.

Beth Malcolm

Beth Malcolm is Scottish based Journalist at Heriot-Watt University studying French and British Sign Language. She is originally from the north west of England but is living in Edinburgh to complete her studies.