BBC: Banned Russian oligarchs exploited UK secrecy loophole

Sanctioned Russian oligarchs from Vladimir Putin's inner circle exploited a UK secrecy loophole left open by the government.

Arkady and Boris Rotenberg - judo partners of the Russian president - used a type of company that was not required to identify its real owners, BBC reports.

Ministers have acknowledged concerns that these companies, known as English Limited Partnerships (ELPs), have also been abused by criminals.

A joint investigation by the BBC and Finance Uncovered has discovered evidence linking a number of ELPs to fraud, terrorism and money laundering.

In 2016 and 2017, the government introduced measures that forced almost all UK companies to identify their real owners. ELPs were not covered by these new transparency laws.

Since then, more than 4,500 of them have been set up.

The BBC has worked with Finance Uncovered to analyse leaked documents and thousands of company records that show how ELPs have become a route to dodge anti-money laundering laws requiring the real owners, or persons of significant control, of UK companies to be disclosed.

ELPs are legitimately used in real estate, investment and pension funds - they have tax advantages, for example, and the amount investors risk is limited.

Unlike most companies, ELPs do not have a separate legal identity. The government says that means they cannot own assets, do not have a beneficial owner, and cannot legally open bank accounts in their own right.

But our investigation has found documents identifying beneficial owners of ELPs, and evidence of their use to open bank accounts and facilitate financial crime. According to Graham Barrow, an expert in financial crime, they are also "vulnerable to misuse" because of how little information about their activity they are required to make public.

Our data shows the number of new ELPs being set up has gone up by 53% since 2017.

"I wish I could be shocked about the scale of this, but I'm absolutely not. I'm just depressed and frustrated," says Helena Wood, head of the UK Economic Crime Programme at the Royal United Services Institute.

The investigation also reveals:

- Leaked documents show ELPs were marketed as an "alternative solution" to avoid transparency laws

- Just five companies, known as formation agencies, have been responsible for 1,500 ELPs, with hundreds listed at registered addresses including one above a burrito bar in central London

- A 71-year-old Swiss ceramic artist used in official paperwork to hide the real owners of UK companies was a signatory for more than 160 ELPs

FBI agents investigating the Boston marathon bombing probed an ELP registered at an address currently home to a barber shop in Bristol.

More than 4,500 ELPs have been created in the five years since the new transparency laws came into effect. In the five years to 2017, 2,950 were set up.

We have established that among those to take advantage of the secrecy of ELPs are members of President Putin's inner circle.

These are brothers Arkady and Boris Rotenberg who were the subject of an investigation by a US Senate committee in 2020. It said they had exploited a global web of shell companies to evade US sanctions imposed following the annexation of Crimea in 2014. These companies were used to buy millions of dollars worth of art.

One of these companies was an ELP. Sinara Company LP was set up in January 2017 and listed its principal place of business at an address a stone's throw from London's Oxford Circus.

It claimed to be involved in "tourism and ticketing services".

Between July 2017 and June 2018, it sent "14 wire transfers in $9,500 increments totalling $133,000" (£109,000) to an art adviser who the Senate report said "facilitated purchases for the Rotenbergs".

Under UK law, there is no requirement to disclose who was behind Sinara, which was dissolved in 2019.

"It's a scandal that people like the Rotenbergs who have been sanctioned in America for years have still been able to use British corporate structures to bring their money out of Russia through these structures and then spend it at will," says Labour MP Dame Margaret Hodge, who chairs a parliamentary group on tax and corruption.

The BBC tried to contact the Rotenbergs, but has not received a response.

Most limited partnerships are set up by so-called company formation agents - or presenters - who provide a registered address and administrative support.

The BBC and Finance Uncovered found that of the 4,500 ELPs formed since 2017, one in four were created by just five UK-based agencies.

These agencies have track records in creating anonymous UK companies for clients in Eastern Europe and the former Soviet Union. Some of those companies they incorporated have also been linked to financial crimes including money laundering.