ShellcompanieshelpdirtymoneycomeoutcleaninLondon’slaunderingracket
By Oliver Bullough
Lfor The Daily Mail
ooking up on an autumn evening at the windows of Britain’s most expensive and desirable apartment block, One Hyde Park, it is hard not to notice an odd anomaly. Very few of the lights are burning.
At the top of this modernist block, built as a joint venture between its developers, the Candy Brothers, and a firm belonging to Qatar’s former prime minister, is a penthouse. In 2010, it sold for £140 million — making it at the time the most expensive flat in the world.
The development is owned offshore, beyond the reach of Her Majesty’s Revenue and Customs or other British authorities, as are most of the flats within. It is hard to say exactly how much living here would cost or who the inhabitants are. But whoever lives at One Hyde Park, most of them don’t appear to spend much time at home.
This is not unusual. With a group of friends, I help run trips called the London Kleptocracy Tours: we fill up a bus with 50 sightseers, rather as if we were taking them round Hollywood to see where Clark Gable used to live or Scarlett Johansson gets her hair cut. Instead of showing them stars, however, we show them more dubious characters.
Across central and west London, our guides point out properties owned by ex-Soviet oligarchs, the scions of Middle Eastern political dynasties, Nigerian regional governors and all the other people who are hiding fortunes.
On the route is Eaton Square in Belgravia, now perhaps London’s most prestigious address — a magnificent oblong of grand, cream-painted, four-square houses behind shoulder-height black railings.
One of the cheapest at a mere £15 million was recently commandeered by anarchist squatters. It belongs to Andrei Goncharenko, a manager at a subsidiary of the Russian gas giant Gazprom, who bought a string of properties in the capital between 2011 and 2014.
Goncharenko’s temptingly empty mansion was just one of 86 properties on Eaton Square alone that is held via the kind of anonymous financial constructs that prevent anyone, including the taxman, from finding out who the true owners are.
Any one of these properties could be owned by a crook, but it’s impossible to say which ones. One apartment stretches across a single floor of two adjoining buildings, and cost £13m: it is owned by Cane Garden Services Ltd, a British Virgin Islands company that is registered in London at a betting shop on the Caledonian Road — a part of North London where you’d be more likely to find takeaways.
Is this a red flag? Perhaps, or perhaps not. When you start looking for red flags, you see them everywhere.
Two houses, Nos. 85 and 102, are both owned by companies registered in Hong Kong. The Liberian company that owns No. 73 is registered in Monaco.
One flat in No. 86 is owned by the Panoceanic Trading Corporation, a Panama company whose name appears to belong in a Sixties spy thriller by Len Deighton or Ian Fleming.
Surely a crook wouldn’t be that obvious? Or is this a double bluff?
Faceless companies based in the British Virgin Islands in the Caribbean own some 30 of these properties. Thirteen more are in Guernsey, 16 in Jersey. Others are in Panama, Liechtenstein, the Isle of Man, Delaware, the Cayman Islands, Liberia, the Seychelles, Mauritius and St Vincent and the Grenadines. Goncharenko himself preferred Gibraltar as home for his company MCA Shipping.
And Eaton Square is just one example. Just as many properties in the adjoining streets are owned offshore, all intermeshed in a great web of confusion and deceit that extends as far as Britain does and then much further. The rich businessmen, corrupt politicians, larcenous public officials and drug traffickers hiding in the web are able to pick and choose what laws they obey.
British law requires people to publicly declare their company ownership. The law in Mauritius does not. Those who can afford to base their companies offshore are granted a privacy that is denied to everyone else.
The rich have set up a new global nation, an invisible country that I call Moneyland. It has no geographical borders, and its financial regulations are as flexible as smoke.
It exists solely to enable the wealthy and corrupt to hide money and avoid taxes. By some estimates, a fifth of all the world’s cash is currently secreted in Moneyland, where governments cannot see it, let alone levy taxes on it.
Borders are for the little people. Moneyland is a place where passports of many nations are for sale. And yet British laws can be made to apply, when convenient: our libel laws can be invoked to silence reporters, for example. In Moneyland, you really can pick and choose the rules.
The offshore model is too lucrative to be ignored. Any autonomous island, such as Jersey in the Channel Islands, can take advantage of its natural offshore status to alter its laws and attract the Moneyland wealth.
Jersey, now a financial centre in its own right, began helping Britons to hide their money in the Sixties. Its speciality is the trust, a tool that allowed families to pass down property through the generations without paying tax on it.
You might live in a Mayfair penthouse, for example, worth millions –— but if it was owned by a trust based in Jersey, with a legal arrangement to pass it to your grandchildren on your death, you could sidestep death duties.
Jersey is a very wealthy community, thanks to the offshore business. Not everywhere fares so well. The Caribbean island of Nevis, where there is no corporate tax levied on companies registered there, is the legal base of 18,000 companies.
Far fewer people actually live on the island — and many of those who do earn subsistence wages as cooks and cleaners for those operating the international businesses.
Billions of dollars from Russia alone have been funnelled through Nevis. Who controlled them, and who profits, cannot be said: the island has a strict policy of secrecy around all business matters. All questions are met with a wall of silence. Moneyland is a recent invention. Once upon a time, if a corrupt official stole millions, there wasn’t much he could do with it.
He could buy himself a nice car or build himself a new house, or give it to friends and relatives, but his appetites were limited by the fact that the local market could not absorb endless sums of embezzled money. The banknotes would just pile up in his house until they were eaten by mice.
Two things changed the economics of illegal cash: the arrival of offshore finance, and shell companies. Some people call shell companies ‘getaway cars for dodgy money’ but, when combined with electronic financial systems, they are more like magical teleporter boxes: stash your stolen funds in a shell company, press a button and it is spirited away out of your country to any destination you choose.
The best way to think of a shell company is like a bag for dog’s mess. The embezzled money or untaxed income is the dirty stuff that no one wants to touch.
Once it’s inside a bag, it’s easier to handle. Pop that bag into another bag, and slip that bag inside another, and now nobody can even tell that the mess in the middle ever existed.
Shell companies are just empty bags. It’s almost impossible to tell who owns them, since they’re typically set up in one country — for example, the Bahamas — and then wrapped in another bag or company, set up somewhere else entirely — for instance, the Isle of Man. Repeat this process until not even an army of forensic accountants could unwrap all the bags and find the dirty money.
That’s the sleight of hand that makes Moneyland so impenetrable to tax collectors and banking regulators. Because it doesn’t exist on any map, no government can declare war on Moneyland and send in an army, implement sanctions or despatch diplomats for talks. But there are physical doorways into Moneyland, like rabbitholes, if you know where to look.
One of these is No. 29 Harley Street, on the tree-lined road running north from Oxford Street, the home of private healthcare.
No. 29 is a stone-fronted terrace house, barely five minutes walk from the Royal Society of Medicine, with a dark-stained wooden front door. As of April 2016, it was the legal address of 2,159 shell companies.
One, Blythe (Europe) Ltd, was registered on Harley Street but owned by P&A Corporate Services Trust Reg, of Vaduz, Liechtenstein — a central European micro-principality which has mysteriously survived into the modern age, and which does not reveal who owns its companies.
Blythe owned an Austrian company, which owned a Ukrainian company called Tantalit, and that owned a five-storey luxury log-built palace outside Kiev called Mezhyhirya. In 2014 it was seized by Ukrainian rebels, who overthrew the country’s deeply corrupt president, Viktor Yanukovich.
At a time when the economy of Ukraine was stagnant and its people were destitute, President Yanukovich had amassed a fortune of hundreds of millions of dollars. His obscene wealth was no secret, but when rebels burst into the palace grounds they were staggered by what they discovered.
An ostrich collection inhabited a private zoo, amid water gardens, a golf course, a nouveau-Grecian temple, a marble horse and an enclosure for shooting wild boar. Inside the cabin were waterfalls, fountains and statues. It was a cathedral of kitsch — which also featured an oriental temple carved from elephants’ tusks, a Picasso vase, antique rifles and swords, corridors lined with portraits of the president, and a flayed crocodile pinned to a wall.
All this, remember, was owned not by Yanukovich but by Blythe (Europe) Ltd, which was to be found in the highly respectable confines of No. 29 Harley Street. It’s like discovering that the New Jersey mob was operating out of a Quaker meeting house.
The appeal of No. 29 to a greed-drunk thug like Yanukovich