Criminals and sanctions-busters exploiting UK secrecy loophole

26 minutes ago
About sharing

By James Oliver, Will Dahlgreen, James Melley & Andy Verity
BBC Panorama, Newsnight and BBC News

An offshore firm helped create companies used by members of Vladimir Putin’s inner circle, including one hiding the late mercenary boss Yevgeny Prigozhin’s yacht, the BBC can reveal.

Seychelles-based Alpha Consulting also helped to form more than 900 UK partnerships which used a secrecy loophole to conceal their true owners.

One partnership was involved in running a sanctions-busting oil tanker, while others committed crimes.

Alpha said it always followed the law.

The investigation by the BBC, Finance Uncovered and the Seychelles Broadcasting Corporation has analysed internal Alpha documents and thousands of company records to identify some of the people who secretly benefitted from the work of the offshore firm, based in the island nation in the Indian Ocean.

As well as catering to members of Russian President Vladimir Putin’s inner circle, Alpha Consulting was a secrecy factory – one of the most prolific companies helping to exploit a gaping loophole in UK law. Some of the partnerships it helped create have been involved in alleged fraud and running an illegal essay mill. One has been accused of interfering in a foreign election.

Yevgeny Prigozhin, boss of the Wagner Group who died earlier this year, was one of those who benefitted from Alpha’s services. His company Beratex Group Ltd was sanctioned by the United States in 2019, as a front company which concealed ownership of his private jet and yacht.

Leaked documents – obtained by the International Consortium of Investigative Journalists and examined as part of the 2021 Pandora Papers investigation – show Alpha helped set up Beratex in the Seychelles, and the hidden beneficial owner was recorded as the mercenary boss’s elderly mother-in-law.

Alpha said it was “never involved in any business activity” with Beratex.

A private jet and a yacht belonging to Yevgeny Prigozhin were concealed behind a front company Alpha helped to set up

Leonid Reiman, a close friend and associate of President Putin, was a client of Alpha. In 2006, while he was Russia’s communications minister, Reiman was found by a Swiss tribunal to have been the secret owner of a company that received corrupt payments.

Despite Mr Reiman’s well-documented relationship with the Russian president, the documents show that Alpha provided a director for one of his companies who failed to declare Mr Reiman was a “politically exposed person” – someone whose position or relationships mean they may be more exposed to risks of corruption and who therefore requires a greater level of checks.

Anti-money laundering expert Geoff Barrow said this was “not really an oversight”. Failing to make a declaration is “a breach of the rules if you are knowingly doing business with somebody who is a politically exposed person,” he said.

Alpha said it had carried out all the required checks on Mr Reiman and did not find information which suggested he was a politically exposed person or involved in money-laundering. It said it does “not act for clients or professional intermediaries who we find have been involved in wrongdoing”.

The investigation also reveals that Alpha, run by a Russian businesswoman named Victoria Valkovskaya, helped to create 927 limited partnerships – one in five of those registered in England, Wales and Northern Ireland since 2017.

Alpha is run by Russian businesswoman Victoria Valkovskaya

Limited partnerships, a type of firm usually created by two or more people to own and run a business together, can also be used to sidestep transparency regulations.

After a law was introduced in 2016 requiring UK companies to declare who owns them or is really in control, there was a surge in the registration of limited partnerships, which were exempt. This requirement was extended to Scottish limited partnerships a year later after it was revealed that they were being increasingly used for money laundering and other crimes.

But last year, the BBC and Finance Uncovered revealed the increasing use of English limited partnerships and evidence linking a number of them to fraud, terrorism and money laundering.

Despite this, the government has failed to extend laws requiring companies to identify the people really in control – known as “persons of significant control” – to all limited partnerships.

Kevin Hollinrake, a junior business minister, dismissed concerns about a loophole, telling the House of Commons “limited partnerships cannot own property or assets in their own name”.

But our investigation shows that Alpha helped create limited partnerships which were used to acquire assets and hide the owners of them – including an oil tanker, the Delfi, which polluted the coast of Ukraine after it was wrecked in 2019.

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

Like many of the firms Alpha helped to set up, it appeared to be partly owned by a Seychelles resident who on paper looked like a prolific entrepreneur: Luther Denis, who is listed as general partner of 184 UK limited partnerships.

Alpha helped create the limited partnership which owned the Delfi oil tanker, which leaked oil for months after it was wrecked

But internal documents show that partners like Mr Denis sign over all their powers to the secret “beneficial owner”. Mr Denis is one of 12 nominee or sham partners provided and paid by Alpha, who often know nothing about what the firms that they help to create actually do.

Following the wreck, a court imposed a fine on Mister Drake PC – but it has never been able to identify the real owner and the fine has never been paid.

Michelle Wiese Bockmann, an analyst at Lloyd’s List Intelligence, said: “The beneficial owners, as they’re known, are ultimately liable and responsible for any of the environmental costs or damages that the vessel causes.”

Our investigation found internal Alpha documents that record the beneficial owner of Mister Drake PC as Alla Kovtunova, the mother of a former local politician in Ukraine’s now-banned pro-Russian Party of the Regions.

Alpha said it was “not aware of any of your claimed activities in relation to this company”.

Baroness Kramer, Liberal Democrat Treasury spokesperson in the House of Lords, said it was a shock the government had not used its economic crime bill to shut down every loophole. “It certainly is aware of this one, and frankly, it can’t even be called a loophole – it’s so wide, you can drive an oil tanker through it,” she said.

The investigation uncovered another eight partnerships linked to Alpha which at one time were registered as owning ships.

In September 2020, Luther Denis was named on paperwork of another partnership, Cilkon PC, which this time was involved in running an oil tanker called the Ostra.

Seychelles resident Luther Denis was named on the paperwork for 184 UK limited partnerships

Under a different name, the Ostra had already breached sanctions against Syria in 2019. Mr Denis’s partnership became involved in running the tanker after its registered owner, a Russian company called Rustanker, was sanctioned for attempting to evade the US ban on trading in Venezuelan oil.

Our investigation analysed tracking data for the Ostra during the period after Mr Denis’s partnership took over. It found the tracker was turned off for three weeks in September last year, allowing it to disappear off the coast of Venezuela – indicating it may have been breaching sanctions again.

Ms Bockmann said ships “go dark” to obscure where they are loading and unloading their cargo, “in order to deceive, evade, and keep one step ahead of any regulatory authorities that are monitoring these vessels”.

The BBC wrote to Cilkon and Rustanker but received no response. We also wrote to Mr Denis but he declined to comment.

The Ostra oil tanker, pictured here under its former name the Nostras, turned off tracking near Venezuela

Other partnerships Alpha Consulting helped set up include:

Green Line LP, a firm that illegally sold heart pills by promoting unproven health claims
NIC International Services LP, which appeared to run, a website offering to write students’ essays for them – a service which is illegal in England
Histol Corporate LP, a firm accused of involvement in a “large-scale fraud” in Russia. Two Russian officials allegedly ordered chemicals for the defence industry at inflated prices from a company owned by Histol, which they controlled

The BBC attempted to contact these partnerships and the people we were able to identify behind them but did not receive a response. Alpha said it was not aware of any of the activities of these partnerships.

Financial crime consultant Graham Barrow said that this use of nominees “brings the whole process into disrepute”.

“It is making a mockery of this idea that the UK is open for business because frankly, we’ll accept anyone’s name on a piece of paper and away you go,” he said.

Alpha set up more than 280 partnerships registered at this Cardiff address – including Mister Drake PC

As well as exploiting this loophole, Alpha may have breached the law in relation to Scottish partnerships, which does require that the people who really control them are disclosed.

In March 2017, the firm involved, Biniatta LP, paid a US lobbyist on behalf of Lulzim Basha, leader of the Democratic Party of Albania. The lobbyist arranged access to Republican politicians and a fundraiser, where Mr Bashar was able to get a photo opportunity with then-President Donald Trump – later used in the Albanian election campaign.

Reports last year suggested US intelligence believed that Mr Basha’s election campaign, whose slogan was Make Albania Great Again, had been secretly backed by Russia with $500,000.

Biniatta’s ownership was hidden through offshore secrecy and sham directors, but the leaked Alpha documents include an agreement from 2015, when the partnership was set up, which named the beneficial owner as a Russian national called Maxim Trofimets.

In summer 2017, when the law for Scottish partnerships changed, Mr Trofimets was not declared as the “person of significant control” of Biniatta, and an Alpha nominee falsely declared that the firm had provided all the information it had to.

The next day, the same Alpha nominee secretly signed a new power of attorney agreement, confirming Mr Trofimets’ control over Biniatta.

Lulzim Bashar and Donald Trump

After media reports of a possible Russia connection in 2018, Alpha’s owner Victoria Valkovskaya set out in an email how Biniatta could conceal its ownership.

The ownership of Biniatta could be structured using a Seychelles foundation with five nominee councillors “so as to not declare a controlling person”.

This would give the appearance that no one person had control over 25% of the company, the threshold under UK law for the requirement to name a person of significant control.

Biniatta followed the advice and no person of significant control was declared. Alpha said it rejects the allegation that it attempted to avoid Biniatta having to make such a declaration.

In September this year, the Council of Europe appointed Mr Basha to prepare a report on supporting the reconstruction of Ukraine following the Russian invasion. He said he had no conflict of interest.

The BBC attempted to contact Mr Trofimets and Mr Basha but they did not respond.

Ms Valkovskaya, Alpha’s managing director, said she “categorically” denied her company was involved in any illegal activity. “We always followed the letter of the law. The use of nominees is not something new or illegal in the industry,” she said.

Alpha Consulting said its “involvement in UK-based limited partnerships is limited to providing advice and assistance with registering, incorporating and structuring them in accordance with UK regulations”.

It does not “engage in, or assume any responsibility for, the management, operation or decision making of our end clients or the companies we assist them in forming,” it said.

Alpha also said it has due diligence and anti-money laundering procedures that comply with the law.

Last month the Seychelles was added to the EU’s tax haven black list.

The Department for Business and Trade told us its economic crime bill would make it easier for Companies House to “tackle rogue agents and deregister illegitimate limited partnerships”, and to challenge and remove suspicious information.

You can see more on this story on Newsnight on BBC Two on Thursday 2 November at 22:30 GMT or on iPlayer.

Related Topics

More on this story

3 August 2022
16 April 2022
11 April 2022