In pursuit of hidden owners behind UK companies

Tonight’s edition of BBC’s File on Four radio programme titled the ‘Great British Money Laundering Service’ looks at how people are flouting new rules to register true owners of UK companies. We contributed to the programme by sharing our analysis of the data in the UK’s beneficial ownership register looking at what it tells us about the profile of some of these individuals, mistakes in reporting and suspected cases of misrepresentation. This matters because companies with hidden ownership are often central to laundering the proceeds of corruption and other crimes, with devastating impacts on the lives of some of the world’s poorest people. You can listen to the programme, and our colleague Murray Worthy, here.

What is clear from our early analysis shared with File on Four is that there are thousands of companies that either aren’t complying with the regulations or are filing suspicious returns. This means that despite efforts by the UK government so far to make companies registered there more transparent, we still don’t really know who own thousands of UK companies. In the coming months we will publish our full analysis on the state of the UK register, but in the meantime here are some of our early results*: 

• 4.1 million companies are now on the beneficial ownership register (3.7 million of these have disclosed at least one beneficial owner).
  
• 4 thousand beneficial owners are listed under the age of 2, including one who has yet to be born. While technically entrepreneurial toddlers can be listed as beneficial owners, it seems impossible that they could be exercising effective control over the company right now.
  
• Over 40% of the beneficial owners of Scottish Limited Partnerships (SLPs) are either a national of a former-Soviet country** or a company incorporated there. This compares to just 0.1% of all Limited Companies (by far the most widely used UK company type), and provides clear evidence that some types of companies are heavily marketed to citizens of former Soviet countries.
  
• 5 beneficial owners control more than 6,000 companies raising the question of whether some of these individuals are simply stooges put in place by the real owners. 

The UK government was the first to  establish a public register of the true owners of companies in 2016 (known as the register of Persons with Significant Control). Not only was this the first time this information was collected and made publicly available, it was also made much more useful as it was made available in open data format. This means anyone can download the entire register, free-of-charge and analyse the information in bulk, enabling NGOs like Global Witness and others to get a bird’s-eye-view of what the data shows. This empowers civil society groups to identify potentially suspicious networks of companies as well as identify loopholes in the legislation that are being exploited.

To demonstrate just how this sort of thing could be done, in collaboration with DataKind UK, we have undertaken the largest ever analysis of UK beneficial ownership company data. Looking across more than 10 million corporate records from Companies House, we’ve used cloud computing and artificial intelligence to monitor the data and identify addresses, individuals and companies being used for potentially nefarious purposes. For example, we’ve analysed companies with beneficial owners listed in secrecy jurisdictions, such as the British Virgin Islands, where a lack of transparency and unwillingness of national authorities to share information makes it more attractive for routing illicit money flows from crime and corruption (see relevant case studies here). 

Without the UK’s open data register, we would never have been able to identify these companies and report them to Companies House, which runs the register of UK companies. According to the latest count, only six people at Companies House are responsible for managing and verifying the register. Companies House needs more resources and more responsibility conveyed to be able to ensure that companies are complying with the register and are able to prosecute those that don’t. Without this, criminals and the corrupt will still be able to use anonymously owned UK companies to launder their dirty cash unpunished.

These findings and the lessons from the UK’s experience in setting up this register will be important for the +30 countries who have committed or already in the process of setting up similar registers. This includes the 27 other EU countries who will need to implement the 5^th Anti-Money Laundering Directive, once it receives final approval in the coming months, the EEA countries (Norway, Liechtenstein, Iceland), as well as Ukraine, Afghanistan, Nigeria, and Ghana.

For many years, we’ve been campaigning for information on company beneficial owners to be made publicly available in a bid to tackle the problem of corruption and anonymous companies. As calls for such information grew, sceptics doubted whether anyone would use this data and if they did, whether it would be able to reveal anything new and important. Our work has shown these registers can be effective in identifying wrongdoing, but in order for this to happen, the registers need to capture the right kind of data and in a format that is most conducive to being used, i.e. open data.

In the coming months we’ll be releasing more information on the UK register, comparing it with new data sets including high risk ‘politically exposed’ people from all over the world and those listed on international sanctions lists. Watch this space.

* This analysis was undertaken with a snapshot of the data from Companies House accurate as of 24/1/2018

**Armenia, Azerbaijan, Belarus, Estonia, Georgia, Kazakhstan, Kyrgyzstan, Latvia, Lithuania, Moldova, Russia, Tajikistan, Turkmenistan, Ukraine or Uzbekistan