Companies registered in UK Overseas Territories ‘used to enable £250bn of economic crime’ Campaigners demand action to enforce law requiring territories to reveal ownership of companies registered in their jurisdiction

Companies registered in Britain’s Overseas Territories have been used to enable bribery and corruption worth more than £250bn, according to a new study.

Figures compiled by anti-corruption think tank Transparency International UK show that more than 1,000 shell companies registered in six Overseas Territories were involved in economic crime ranging from holding bribes paid for African mining concessions to the purchase of a private jet.

State assets

The data, based on 237 corruption cases dating back to the 1990s, shows that the £250bn of crime proceeds from activity including rigged public contracts and the unlawful acquisition of state assets outstrips the amount spent on the UK’s foreign aid budget over the last 20 years.

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“The secrecy made possible in the territories has been key to criminals across the world enjoying immunity for their actions.” Duncan Hames, director of policy, Transparency International UK

By far the largest number of shell companies found to have been involved in suspicious activity was in the Caribbean territory of the British Virgin Islands, which accounted 92 per of cases highlighted in the research.

Russia was the country where the highest number of offences using the companies was committed, followed by Ukraine, Kazakhstan, Nigeria and Azerbaijan.

Ministerial meeting

The findings come as the heads of each of Britain’s 14 Overseas Territories, over which the UK retains sovereignty but which are self-governing, meet with Government ministers in London this week.

Among the key issues before the gathering will be the implementation of legislation passed in Westminster earlier this year requiring the territories to bring in public registers revealing the final or “beneficial” owners of companies – and their assets – registered in their jurisdictions.

A number of the territories, including BVI, the Cayman Islands and the Turks and Caicos Islands, have developed large and lucrative offshore financial services sectors catering for individuals seeking to benefit from secrecy rules and low taxation.

Legal challenges

Under the new legislation, the territories have until 2020 to introduce public registers or face them being imposed by London. Several of the territories, including BVI, have made plain their opposition to the changes and are considering legal challenges asserting that the law breaches their self-governing status.

Duncan Hames, director of policy at Transparency International UK, said: “It’s disappointing that the British Overseas Territories have resisted further progress towards corporate transparency.

“The secrecy made possible in the territories has been key to criminals across the world enjoying immunity for their actions. It does nothing to aid the reputation of financial centres to provides services and secrecy that enrich a corrupt global elite at the public’s expense.”

Shady dealings

Based on court documents and material including the so-called Panama and Paradise papers, the think tank examined criminal cases dating back 30 years involving companies registered in six of the territories.

The researchers found that the shell companies involved in shady dealings were broadly used for three types of activity – the extraction of funds such as bribes or embezzlement; the movement or laundering of corrupt funds through networks of trusts and nominees; and the use of the ill-gotten money to buy assets such as yachts, jets and art.

Among the incidents was the use of BVI companies to allow Gulnara Karimova, the eldest daughter of the ex-president of Uzbekistan, to funnel some of the proceeds of an alleged £606m of shares and payments paid as a bribe by foreign companies wanting access the Uzbek mobile phone market. It is claimed the funds were used to pay for luxury goods and property. Ms Karimova has denied any wrongdoing.

Knightsbridge

In a separate case, a house in London’s Knightsbridge bought by a BVI-registered company was seized this autumn under Britain’s first “unexplained wealth order” after ownership of the company was traced to an Azerbaijani banker.

Research carried out last year established that nearly two thirds of £4.4bn of property suspected to have been bought with “suspicious wealth” was owned through companies registered in Oversea Territories.

Transparency International called for the Government to set out a formal timetable for helping the territories to establish public ownership registers.