Russian gangsters cleaned tens of millions of pounds of dirty money by paying opaque Scottish “ghost” firms for fake goods and services, a major new investigation has revealed.

Criminals and corrupt oligarchs across the former Soviet Union have long used Scotland’s opaque limited partnerships or SLPs to carry out some of the biggest money-laundering schemes ever uncovered.
Now experts from Transparency International have found two dozen criminal and commercial court cases in Russia over the last decade where SLPs - or sometimes their English or Northern Irish equivalents - received illegal money transfers for fictitious or overpriced invoices.
What the analysts are uncovering is something called trade-based money-laundering or TBML. It is one of the simplest ways to wash the dirt off your cash.

Steve Goodrich, head of research and investigations at Transparency International UK, explained how this kind of scheme works.
“Imagine you’re an organised criminal gang or a senior politician. You’ve managed to generate some income from activity that is not quite above board. You want to move it out of the country and put it in a relative safe haven – somewhere where there are strong property rights.
“Normally, one would transfer money across borders using a simple bank transfer. But you don’t want to raise suspicions and this kind of money flow would do just that. What do you do?

“You generate a load of paperwork and shell companies to persuade banks that you’re buying, say, industrial equipment.

“This will be equipment that never arrives, and indeed probably never existed, but that’s not the point – you’re providing cover for the transfer. The ‘supplier’ is in fact a company owned by you or an associate (you’re paying yourself!).”

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Mr Goodrich’s colleagues at Transparency International Russia - which is banned at home and now works in exile - carried out a major analysis of hundreds of TBML cases to make Russian courts between 2013 and 2022.

They found one in 10 of the judicial processes featured British firms as the fake suppliers, accounting for £150m worth of illegal transfers. SLPs were the most common corporate entity abused. In their report, the Russian analysts stressed that some of these firms remained “live” even after successful prosecutions.
Criminals used Scottish limited partnerships regularly to launder money through TBML, they wrote. “Some UK legal entities involved in TBML schemes, including limited liability partnerships and LPs, changed their names and continued to operate."
Last June a Russian businessman called Viktor Rybnikov was convicted of laundering £95m while “acting as part of an organised group”. He was found guilty of transferring money to a network of foreign companies for telecommunications services that were not actually provided.
Two of the firms involved were Edinburgh-registered SLPs called Carens Solutions and Rikson Capital, which were dissolved in 2015 and 2016 respectively. They were officially headquartered at a virtual office in the capital’s Mitchell Street.
The two businesses existed before the UK Government, which is responsible for corporate law north of the border, imposed new rules insisting that SLPs name a person of significant control.  So there is no way of knowing who was in charge.
This is also the case for an SLP called Vestrus Trade. Before it was dissolved, it was officially registered at a mailbox firm in Edinburgh’s Rose Street, one of scores of businesses offering PO boxes.
A Russian businessman called Denis Nikitushkin was sentenced to five years suspended in Moscow in June 2021. He was found guilty of making fake orders of computers from Vestrus Trade as part of a £690,000 laundering case. There is no suggestion that registration agents in Scotland were involved in any illegal or unethical activities overseas.

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At least three of the two dozen TBML cases highlighted by Transparency featured SLPs set up at 78 Montgomery Street. This was the home of the late controversial businessman John Hein, host of thousands of shell firms.

Speaking before his death, the company formation entrepreneur confessed he found the gangsterism linked to his address to be “horrifying”. He added: “My lifestyle it is not one of a multi-million-pound criminal.” This was true, though firms linked to some of the biggest laundering scandals of modern terms were, formally if not actually, based at his modest home.
The TBML cases highlighted by Transparency included some where some kind of good or service was delivered - but was not worth as much as claimed.
In one case a customs officer faced charges of negligence after failing to notice a multi-million-pound electric generator supposedly delivered by an SLP did not exist. The officer was not convicted because prosecutors took too long to bring him to court and he was protected by the statute of limitations.
Transparency stressed that legal proceedings often took place years after the actual crimes were committed.

“Based on our analysis of Russian court decisions, we see that illegal activities in every TBML scheme last up to one to two years on average,’ they said. “Investigations and court decisions may be delivered with a lag of five years from the immediate event of illegal activity.”
Transparency UK added that the British shell firms identified by their Russian team were very similar to those named in some of the big “Laundromats” identified by investigative journalists led by the Organised Crime and Corruption Reporting Project (OCCRP).
Scotland, as The Herald revealed six years ago, played a key role in the biggest of those laundering operations. At least £20billion, for example, was funnelled out off Russia using one Laundromat exposed by the OCCRP. Of this, some £4billion went through Scottish firms, often SLPs. That was £1000 for every family in the country or the value of annual whisky exports.
The latest numbers are far lower. This is because, crucially, they are are based on criminal convictions or adjudications in commercial courts for just one kind of laundering.

Justice in Russia can be arbitrary. Figures close to the regime of Vladimir Putin can enjoy impunity from prosecution. So figures on court proceedings may not capture the full scale of any crime.
Transparency’s exiled Russian chapter believe the cases that get to court are only “the tip of the iceberg” for TBML.

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Alison Thewliss is a MP who has been campaigning for the British government to do more to crack down on abuse of shell companies.
She stressed the similarities between the newly revealed TBML cases and the old laundromats: they all featured SLPs and other shell firms warehoused in virtual offices.
“The UK Government may feel like the problem of SLPs has gone away, but this report from Transparency International demonstrates that they remain an integral part of a tangled international web of trade-based money laundering,” the SNP politician said.
“Companies House was recently given new powers to investigate businesses on their register – including those with addresses which raise suspicions.
"Given the very clear link between the actions of these SLPs, and their registration at mailbox addresses in Scotland, I would urge them to prioritise addresses such as those found in the report, where thousands of companies are registered at the same mailbox address.”
The British government plans to tighten registration rules for partnerships, including SLPs. It wants such businesses - which are often use for legitimate and complex investment schemes - to reveal more about their partners and their controllers and to prove some meaningful connection to the UK.
Transparency previously subbed SLPs “Britain’s home-grown secrecy vehicle”. Now it wants faster and further reforms that those being proposed - not least for the sake of national security.
"As the war in Ukraine rages on, this work provides a timely reminder of how the UK has contributed to criminality within Russia,’ Mr Goodrich added. “That similar schemes have been used to evade sanctions provides a reminder of how important this issue is to European security. It’s time the UK regained its focus and doubled-down on financial crime, and Britain’s role in enabling it.”

This is part one of a three part series. Read more from David Leask in The Herald on Sunday and Monday.