The Scot behind firms which laundered $7 billion out of Russia

The Edinburgh-based Cypriot-born businessman set up, hosted and served as a director for four limited companies used to transfer $6.98 billion from Russia and in to a maze of accounts held by untraceable shell companies, many Scottish.

That is around £5 billion at current exchange rates and worth more last year’s annual total for Scotch whisky exports.

UK and international leaders have become increasingly worried by the Laundromat, which they believe was abused by a range of both criminals and government officials in a country where those two categories often overlap.

Last month British business minister Andrew Griffiths told The Herald that the Laundromat was a “complex and corrupt money laundering scheme that allowed officials to move money out of Russia and around the world”.

This huge pipeline for dirty money was first exposed in 2014 by a global team of journalists led by the Sarajevo-based Organized Crime and Corruption Reporting Project (OCCRP) and Moscow’s independent Novaya Gazeta newspaper.

The Herald calculated the transactions for the four businesses set up by Mr Papantoniou from raw data provided by OCCRP. The accountant has refused to answer questions about the companies, Westburn Enterprises Limited, Mirabax Investments Limited, Caldon Holdings and Tottenham Management and their activities. These enterprises accounted for around a third of the total net transfers of money out of Russia between 2010 and 2014 identified by OCCRP.

READ MORE: Analysis from Paul Radu of the OCCRP

However, investigators believe that the Laundromat could be even bigger, perhaps totalling $80 billion, about a third of the value of Scotland’s entire economic output for a year.

There is no suggestion that Mr Papantoniou, who directed Westburn Enterprises for ten years from May 2004, signing off its accounts, had any knowledge of its activities or those of its sister entities.

Mr Papantoniou declined to speak to The Herald, claiming our reporters did not understand the issues. In a Facebook message, he said: “There are hundreds of company incorporation agents in Scotland. Ask some others in this business. Herald seems to be stuck on me for some reason!!! If I felt you knew what you are talking about I might have responded positively to you!”

Asked to explain why companies he created were found in Laundromat data obtained by the OCCRP, he said: “I think you definitely need educating!! I am not going to educate you though! This is not investigative reporting! Its sensationalism, which is what you do when you do not have the real facts!!! Publish this if you can!”

The Herald, also using OCCRP raw data, last year revealed that at least £4 billion from the Laundromat had been funnelled through Scottish firms.

Data is complex and subject to double or triple counting, with the same money passing through the accounts of several businesses.

Much of the focus since the Laundromat has been on Scottish limited partnerships or SLPs, dubbed “Britain’s home-grown secrecy vehicles” after they were abused on an industrial scale for money-laundering and international fraud.

There were more than 100 SLPs in the Laundromat. This fact last month helped provoke the UK Government, increasingly concerned about the influence of Russian government and criminality, to announce proposals to reform the once rare form of corporate entity.

Anti-corruption campaigners, however, warn that more needs to be done to regulate Britain - and Scotland’s cottage industry of white-collar professionals providing shell companies, whether they are SLPs, or limited companies like the four Mr Papantoniou created.

Alison Thewliss of the SNP is one of a cross-party group of MPs fighting for a crackdown on laundering and the abuse of shell firms, not just SLPs.

She said: “Once again, details are emerging of nefarious business activities linked to financial vehicles in the UK.

"The eye-watering figure of $7 billion of laundered money linked to the Laundromat scandal ought to make the Treasury sit up and take notice. "Yet despite all this, along with the damning evidence presented during last week’s debate on the Sanctions and Anti-Money Laundering Bill, the UK Government is still dragging its feet.

"For example, they have said that a future consultation on limited partnerships won’t conclude until 23 July. This is not nearly quick enough - we need to see a plan of action.

"Every day, it seems, brings a new scandal with regards to apparently illegitimate activities being tied to UK businesses and intermediaries. “Until the UK Government takes proper action, the UK’s reputation as a world-leading place to do business will continue to be tarnished."

Alison Thewliss

The Laundromat had 21 core vehicles used to get money out, including the four limited companies created by Mr Papantoniou and two SLPs, OCCRP research shows. Criminal and journalistic investigations continue.

BACKGROUND

Its HQ, on paper at least, was a modest front-door flat on an Edinburgh side street. Tiny Westburn Enterprises had a modest turnover to match, barely £5,000 in its decade-long existence. This wasn’t small business, this was micro business, or so its annual filings at Britain’s Companies House suggest.
Yet Westburn Enterprises was anything but small. It was one of the biggest and most significant money-laundering tools in recent world history, according to an international investigation. 
As The Herald reported last year, Westburn played a core part of what are alleged to be two giant “Laundromats”, Russian and Azerbaijani, uncovered by journalists and documented by the Organised Crime and Corruption Reporting Project, or OCCRP.
Between 2010 and 2014, its accounts were used to take £2,256,425,887 out of Russia, The Herald can now reveal. 
That is a net figure. The amounts slushing back and forth through its accounts were even higher, some $18 billion gross, as the Sunday Post first reported late last year. 
Extreme caution should be applied to gross figures. It is easy to count every rouble or dollar more than once as it ebbs and flows. Yet the overall volume of transactions for Westburn Enterprises is important. That is because this tiny Edinburgh business, a limited company that has to file accounts and name directors and shareholders, said it was a “commission agent” in its Companies House filings. How small must its commission have been? In 2013/14, its last accounts, it said its turnover was £1,800.

READ MORE: Analysis from Paul Radu of the OCCRP

Westburn’s address is – or was – the family home of Marios Papantoniou, a former Cypriot tax inspector who has run company formation and book-keeping businesses in the capital since the 1990s, including a recently wound-up business called Axiano.
Mr Papantoniou was a director of Westburn for a decade after Axiano incorporated it in May 2004. He signed off its accounts in 2011, 2012 and 2013. 
Though that does not mean he had knowledge of any suspected wrongdoing in the company’s activities, which involved, according to the OCCRP’s bank records, billions of dollars passing through offshore accounts which Westburn Enterprises controlled. 
Mr Papantoniou’s resignation from the directorship took effect from May 2014, but was not received by Companies House, electronically, until Oct 20,  2014, just four days after The Independent first broke the story of how Westburn Enterprise’s was allegedly used in the Russian Laundromat.
Mr Papantoniou appears to be a nominee director, meaning he is acting on behalf of someone else. His business was also the nominee shareholder in the firm. Annual returns filed by Westburn show Axiano Company Secretaries Ltd as the holder of its sole £1 share. This shareholder shared the same address as Mr Papantoniou and Westburn: 71 Brunswick Street, Edinburgh. Nominee directors have the same legal duties as all other directors.
Mr Papantoniou also created, hosted and served as a director for three other Scottish limited companies involved in the Laundromat. They were Caldon Holdings Limited, Mirabax Investments Limited and Tottenham Enterprises Limited. OCCRP shows net transfers out of Russia through these firms were $1,269,607,528, $1,291,010,529 and $2,155,601,756 respectively. With the money funnelled through Westburn, the grand total came to $6,972,645,700 or, in round terms at current exchange rates, some £5 billion.
Investigators say the Russian and Azerbaijani Laundromats used very similar basic schemes and may have acted on behalf of both criminals and the officials in President Vladimir Putin’s regime. 

Vladimir Putin

Ghost companies, fronts, sued each other through Moldovan courts. Judges ordered firms in Russia or Azerbaijan to pay what were essentially fictional debts. And so money left the former Soviet Union to ostensibly respectable UK or other international firms. It was then cascaded through even more businesses and accounts until it became almost impossible to trace. 

Some 76,000 transactions at 732 banks in 96 countries totalling, gross, some $156 billion, were leaked to Russia’s Novaya Gazeta and OCCRP. The net known figure said to have been laundered is around $21bn. 
Journalists and law enforcement officials are still trying to figure out the details of where the money is now. Some has re-emerged, freshly recycled, back in the old USSR, where it was looted in the first place. Criminal investigations continue in Moldova in to some 14 judges. The system was effectively dismantled in 2014. 
A key part of the system were Scottish limited partnerships or SLPs, the anonymously tax haven firms about which The Herald has written for the last three years. There were more than 100 in the Russian Laundromat. There were another 20 or so in the Azerbaijani one, valued at $3 billion, some of which investigators found went to slush funds believed to have been used to corrupt officials inside EU nations.

Mr Papantoniou was a prolific creator and host of SLPs. The Herald has now counted some 700 at addresses his Axiano and Lawsons agencies used.  Half a dozen of these SLPs were named by the investigators trying to get to the bottom of yet another mass laundering scandal, the $1bn looting of three Moldovan banks. 
Back in 2015, Mr Papantoniou then told The Sunday Herald he had sold on the SLPs to an Estonian agency and had no knowledge of their activities. He later added that he was considering legal action against the investigators, Kroll, who were acting for the Moldovan parliament.
Mr Papantonoiu told us this week he would not  speak to The Herald because, in his view, we were sensationalist.
The 63-year-old did talk to The Sunday Post later for a story published in November last 
year. He said: “Apart from setting up these firms I have no involvement. I do due diligence but there is only so much you can do. Who knows what happens to the firms?”
“They get sold on.
“I have never knowingly dealt with criminals or the mafia in setting up these firms but you never know.”