In December I wrote a blog on a Transparency International report that highlighted this issue:
Due to the anti-money laundering directive introduced this year, anyone wishing to form a company by visiting an accountant, solicitor or formations agent (classified under the ‘Trust and Company Service Providers' (TCSP) umbrella), must fulfil due diligence requirements, including having their identity confirmed.
However, as the government's official registrar, Companies House is exempt from the rules as it occupies a statutory role to register businesses and issue incorporation certificates, and does not operate as a business itself.
As they noted:
According to Richard Osborne, managing director of eFiling, what this means is that “in just one visit to the government website, fraudsters using a throwaway email address can create a company and funnel their illicit finance through without any appropriate legal checks. All that is really required is a valid UK address and the name of a fictitious company director.
This is true.
As a result a reader of this blog, Ron Lawley, wrote to his (Conservative) MP as follows, sending the blog in question:
Dear Sir Nicholas Soames,
Re; UK money laundering loophole
It appears the UK has a loophole which allows money laundering to occur.
This loophole may have been deliberately created by the government and must be now closed.
If it is not closed immediately we can only see that as verification of the claim that it is deliberate and the government's own rules are deliberately and deceptively being undermined by the government itself.
This looks like a very high level of dishonesty somewhere in the government and I would be grateful if you could point this out and have this loophole closed. We all know we need to stop the fraudsters and it is disheartening that the government deliberately leaves holes for the dishonest to get round the intention of the law.
I hope you can do something about this.
I leave a part of the blog by Richard Murphy on this email with the full relevant documents attached.
Yours
Ron Lawley
This, I am assured, was the reply:
Dear Mr Lawley,
Thank you for contacting me about money laundering, Trust and Company Service Providers (TCSP), and Companies House.
Companies House has a statutory duty to incorporate and dissolve limited companies, register company information, and make it available to the public. Unlike TCSPs, which are already supervised for anti-money laundering purposes under the money laundering regulations, Companies House is not a private-sector profit-making business. The registrar has no discretion in law to refuse or decline a request to incorporate a company. Companies House therefore cannot decline to establish a business relationship in the way that firms regulated for anti-money laundering purposes must when they cannot discharge their customer due diligence obligations. Due to its statutory obligations, Companies House is not considered to be a company formation agent.
I understand that the issue you mention has been raised with Ministers before, and is being monitored on an ongoing basis. However, the Government's view is that measures to in some way extend the TCSP rules to Companies House would impose unnecessary burdens on both Companies House and on legitimate companies, and would delay the company formation process.
The Office for Professional Body Anti-Money Laundering Supervision (OPBAS) is also soon to be established. OPBAS will work to ensure consistently high standards of anti-money laundering supervision, and Ministers have expressed the view that it is right to establish this body first and then take account of its conclusions around TCSP supervision before taking any further action.
Thank you again for taking the time to contact me.
Yours sincerely,
The Rt Hon Sir Nicholas Soames MP
House of Commons
London
SW1A 0AA
Tel 020 7219 4143
nicholas.soames.mp@parliament.uk
http://www.nicholassoames.org.uk
This is a quite extraordinary argument. What it is suggesting is that:
a) That because Companies House is in the public sector it cannot be subject to anti-money laundering rules.
b) That Companies House has a duty to incorporate for anyone without question.
c) The prevention of money laundering is an unnecessary burden on business.
These claims are just wrong. The first claim is contradicted within the letter: it is a matter of choice that Companies House is not subject to anti-money laundering legislation.
This, then, destroys the second argument. It is also a matter of choice that Companies House must supposedly incorporate for anyone, whoever they are or are not and whatever their intentions. Clearly that could be changed if desired, and the letter admits it, so it is not true. And of course as a matter of fact it is already not true: Companies House cannot incorporate now for a person debarred from holding office as a director and so they already cannot incorporate at will. The claim is just wrong and shows that the failure to act is deliberate choice.
Third, if it was true that anti-money laundering regulation is a burden why has the government imposed this law on the private sector already? And does it really believe crime and tax evasion worth putting up with so incorporation can take place within an hour or two? If so, what does that say about their judgement and priorities?
Soames clearly got a briefing on this letter: what is written is not in the language of a constituency MP. What that briefing confirms is what I suggested in December: the UK government really is intent on promoting opportunity for money launderers and those committing related crimes, such as tax evasion.
Why is that?
What is it that the government thinks to be to the advantage of the UK when doing so?
That's a question in need of an answer.
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If, after Brexit, money-laundering will be the only industry left, credit to the Government for doing its bit to foster British industry.
[…] http://www.taxresearch.org.uk/Blog/2018/01/09/why-is-the-uk-government-so-keen-to-help-money-launder… […]
In discussing the UK’s facilitation of money-laundering, let’s not forget the UK Government’s lack of interest in Limited Liability Partnerships. In the UK these exist under 3 legislations, England-Wales, Scotland, N Ireland, but, being aspects of corporate law, their enactment and amendment are reserved to Westminster.
Until fairly recently, an LLP could legally operate in the UK without disclosing its beneficial ownership and without filing accounts, making it an ideal and highly secretive vehicle for money-laundering. From 6 April 2016 (26 June 2017 in Scotland), identity of owners was required to be disclosed to Companies House, but it appears that very few have actually done so and, being an old cynic, I’d guess these few are the legit LLPs run by legal and accountancy etc partnerships. Of course the ineffectiveness of Companies House may also be a factor in the lack of disclosure, but I suspect the people behind the dodgy LLPs will never make any honest disclosure.
The UK Government has repeatedly ignored questions raised in Westminster by SNP MPs and seems uninterested in taking any action. However investigative journalists have revealed how LLPs, particularly in Scotland, have been involved in some of the biggest money-laundering scams of recent times. These revelations have routinely been used by the mainstream media to cause embarrassment for the Scottish Government (if only by association), although there is nothing substantive it can do as the matter is reserved to Westminster. I don’t see the English or N Irish press so much, so my question is: have they run stories about money-laundering associated with English- or N Irish-registered LLPs? It seems unlikely that they’d be immune to the scams.
I’m not a lawyer, so my other question is directed at any Scots Law experts here: is there nothing in Scots Law that could be used to end/diminish/hamper the use of Scottish LLPs for illegal purposes without having to get it approved first under corporate law by Westminster?
I’d like to know the answer too
I hope this comment does not appear off-topic; let me explain. I referred yesterday to the BBC Panorama/BBC Scotland Investigates programme on bankrupts hiding their major assets (successfully), and exploiting weaknesses in Companies House. I think the last five minutes of the programme (on the failure of the Government to respond adequately to the issues raised) were perhaps the most telling. The problems created by Companies House were explored. Your references to the inadequacies of Companies House on this Blog, Richard were also confirmed by the evidence presented here.
It seems that Britain is indeed “open for business”; at any cost, at any price but sans any standards at all. ‘Open for business’ should mean open to fair competition, fair dealing and transparency; reinforced with the certainty that sanctions against wrongdoers have a very high probability of being successfully executed by an active and well-resourced regulator, rigorously supported by the force of law. It would be fair to conclude that none of this is currently the case in Brtain, on any ‘fair and reasonable’ test. Why is that?
‘Prima facie’, the problem it seems to me, at least as presented and exposed in the programme, starts – and finishes – with Government. Which brings me back to Mr Lawley’s letter and your Blog.
Thanks for bringing this to my attention
I’ve always taken ‘Open for Business’ as a euphemism for Open to Bribes.
I’m pretty sure these constituency M.P’s have ‘standard responses’ on a data base that they just attach after the ‘Dear……’ bit.
I’ve got this impression from responses of my own M.P. on a variety of issues -it’s a copy and paste job.
Writing to Government M.P’s, as a result is largely a waste of time as they have automated themselves, have no educative function and are largely ciphers of corporate interests.
I suspect the broad answer is: ‘because behind capitalism as its portrayed is a truth a hundred times worse and Soames’s reply gives a slight whiff of the extent of an enormous stench.’
The purpose of billionaires is to condense their control of wealth and power further and further. The purpose of millionaires is to protect billionaires. One role expected of them therefore is to be in government to make decisions like this.
This is illustrative of the questions we must ask and keep asking. We either do that and create massive change, or arrive at a destination the billionaires aim for where we cannot even ask.
Amazing arrogance from a government apparatus that clearly believes it is above the law and only the “little people” like me need to comply. I would contrast this with the truly draconian “unlimited” penalties chargeable on a tax professional not a member of a professional institute, who must register with HMRC for money laundering regulatory requirements.
Equality before the law has become a sicker joke than it already was.
[…] I noted in another post this morning: […]
The answer to the question you posed – was to a certain extent provided by last night’s Panorama (whilst not directly concerned with money laundering – was nevertheless all about company registration) . One of the erm… “subjects” was a significant doner to the Tory party – maybe he still is (despite being barred from being a company director etc). Why would the tory party & thus the Tory government kill the goose that lays the golden egg? (= donations/bribes/bungs). Soames knows which side his bread is buttered (both sides given his size) hence the (non) reply.
The ideology is called ‘ wealth creation ‘ and the policy is called ‘ light touch regulation ‘ . Two simple phrases sum it all up.
I think that they are lax about money laundering because they hope some of it will come their way in the form of political funding.
Can you believe as someone who has been a TCSP for 35 years I complained about this matter as soon as the policy was changed in 2014 in that people could go direct to Companies House instead of using a holder of an AML licence such as a TCSP accountant or solicitor. I met with the then Secretary Of State Sajid Javid MP who told me to contact the person responsible for the matter Baroness Neville -Rolfe.
To demonstrate the farcical situation I set up a company in the Baroness name and that of a ficticious Arab at a non-existant address I simply made up. The company was formed in 2 hours and I went to London with the documents but the Baroness refused to see me, she did not know what I had done, just refused point blank to hear my concerns and that of TCSP’s who are regulated unlike the Companies House cheap as chips online system.
Within 7 days I dissolved the company but now I am the first person in the UK to be ever prosecuted for filing bogus documents. I did it and wrote to her telling her what I had done and why, but now must attend Court to answer the charge brought by the Insolvency Service against me.
Any advice would be welcome
Tell the truth
I hope you are alerting mainstream media organisations to your impending Court case. I would hope there would be interest at least from the Guardian.
Right, so they have passed the buck on to this so-called ” Office for Professional Body Anti-Money Laundering Supervision (OPBAS). Which is “soon to be established” and will supposedly “work to ensure consistently high standards of anti-money laundering supervision”
1. The obvious question is when (how soon is “soon”)
2. In the meantime corporate crooks have a window of opportunity (that reprieve may be deliberate).
3. There may be a strong hint in the phrase “consistently high standards”. We can (and should) take that to mean that the new office’s standards will be consistent with the laws and standards that apply to everyone else in the country.
I also think that we could easily out-argue anyone that tried to nitpick that conclusion.
Intentionally or otherwise, Soames and his lawyers have handed us something of genuine significance here and Ron Lawley has done well to secure it. The idea that these standards should be consistent is no longer a matter of opinion (our opinion). It is the stated assurance of a long-serving government MP.
4. If I were you, Richard I would get hold of the original letter of reply in whatever form that may be and use it when required.
5. The challenge is now set. When the OPBAS is established they should be rightly expected to apply consistent standards across the UK and held to account if they fail to do so.
Ron Lawley’s letter has brought a significant development here. I wouldn’t dismiss it lightly.
Ron
Do you have a scan?
Richard
Hi Richard,
The reply from the Rt. Hon Sir Nicholas Soames came in an email so I can forward it to you if you give me an email address. I write to my MP a lot and question him on various topics and keep his answers with all the Tory lies.
It is possible that many ministers could be in violation of the ministerial code if they are deliberately lying to the public.
Ron
richard.murphy@taxresearch.org.uk
Thanks!
Re; Your question that needs an answer
I would be happy to ask my MP the question.
He is very good at replying.
Maybe a few other MPs could answer it as well.
Ron
Might you try again?
Best
Richard
PS Would anyone else like to try?