Introduction

For decades, the Overseas Territories have been identified as a weakness in the UK’s strategy for tackling the global flow of corrupt wealth. The corporate secrecy provided by these jurisdictions has made them preferred destinations for individuals seeking to hide criminal acts and enjoy the proceeds of their crimes with impunity. Businesses, journalists, and the public face an almost impossible task in identifying the true owners of companies registered in these territories. Even UK law enforcement agencies have encountered challenges despite holding privileged rights to request these details under existing information-sharing agreements.

Overview

Based on evidence from 237 corruption cases from the last 30 years, this briefing identifies ,1201 different companies registered in the UK’s Overseas Territories that have facilitated gross abuses of entrusted power for private gain. The sample of cases covers allegations ranging from initial evidence of corruption to successful prosecutions. These cases represent over £250 billion worth of funds diverted by rigged procurement, bribery, embezzlement, and the unlawful acquisition of state assets across 79 different countries. This scale of damage is greater than the entirety of the UK’s foreign aid budget over the past 20 years.

Involvement by territory

Data indicates that 1,201 companies from six of the UK’s 14 Overseas Territories featured in cases of grand corruption and high-end money laundering. The British Virgin Islands (BVI) was the primary destination of choice for secrecy; 1,107 companies (92 per cent) were incorporated there. Companies registered in the BVI featured in 213 (90 per cent) of the 237 analysed corruption and money laundering cases. Other territories identified include the Cayman Islands, Bermuda, Gibraltar, the Turks and Caicos Islands, and Anguilla.

Jurisdictions of origin

The report identifies jurisdictions of origin where the suspected or proven predicate offences were committed and where public money was stolen. The five most common jurisdictions of origin in the sample were Russia (36 cases associated), Ukraine (21 cases), Kazakhstan (15 cases), Nigeria (14 cases), and Azerbaijan (12 cases). These are the locations where the victims of these crimes—ordinary citizens—reside.

How companies in the UK’s Overseas Territories contribute to corruption globally

Money launderers choose these jurisdictions because they are not required to reveal their owners to the public. This secrecy assists in the extraction of resources by hiding conflicts of interest, the movement of corrupt wealth through complex networks, and the investment of funds into luxury assets like property, yachts, and art.

Extraction

Anonymous shell companies are used to mask embezzlement and channel bribes. For example, the US hedge fund Och-Ziff paid £336 million to settle bribery probes involving a Turks and Caicos-registered joint venture that bribed officials in Niger, Chad, and Guinea for mining concessions. Additionally, officials in the Republic of the Congo allegedly used Anguillan companies to benefit from oil deals that cost the country at least £500 million.

Movement

Secrecy allows legal entities to “layer” funds, providing distance between the crime and the destination of the money. In one case, Gulnara Karimova allegedly received £606 million in bribes from telecommunications firms. Financial documents showed most payments were sent by BVI-registered firms to a Gibraltar-based company, Takilant Limited, which held numerous Latvian bank accounts and was part of a transnational network of shell companies.

Investment

Companies in the Overseas Territories are used to hide beneficiaries and the sources of wealth. Transparency International UK identified 176 properties bought across Britain using £4.4 billion worth of suspicious wealth, 63 per cent of which were owned through companies registered in the Overseas Territories. Currently, such companies own almost 28,000 properties in the UK.

Artwork

Discretion in the fine-art market makes corporate vehicles in the BVI and Cayman Islands ideal for anonymising transactions. During the 1MDB scandal, where £3.48 billion was allegedly misappropriated, a BVI-registered company, Tanore Finance Corp, purchased £105 million of artwork. A Cayman Islands company, Triple Eight Ltd, was later used to receive a £64 million loan payment secured against these works.

Luxury vehicles

Offshore companies are also used to hide the ownership of luxury vehicles. Paradise Papers documents show that Olga Shuvalov, wife of a former Russian deputy Prime Minister, was the beneficial owner of a Bermudan company, Altitude X3 Ltd, which owned a private jet worth approximately £36.7 million. This asset was not included in official wealth declarations.

Recommendations

Ending the secrecy provided by these jurisdictions is necessary to reduce places for corrupt individuals to hide. Both the UK Government and Overseas Territory governments have roles to play in ensuring public beneficial ownership registers are accurate and effective.

The UK government

Recommendation 1 states that the UK Government should set out public and time-bound plans for providing assistance to the Overseas Territories. This should include funding to help jurisdictions comply with the Beneficial Ownership Data Standard and seconding policy and technical experts from the Department for Business, Energy and Industrial Strategy and Companies House to provide implementation support.

The Overseas Territories

Recommendation 2 advises Overseas Territory governments to establish best-practice registers that are public, accurate, up-to-date, and free to access. Recommendation 3 suggests increasing coordination with UK and overseas law enforcement, including providing agencies with open access to company registries to assist with investigations and monitoring for suspicious activity.