Special investigation: The criminals cloning Scots companies

The tenants, mostly Romanians, never open them. And they do not want to talk about the correspondence that arrives at their homes. “It is not for us,” said one man, refusing to give his name.

There are six flats in this block. On the day first of this month ten new companies were registered at five of the properties. All, theoretically, are transport firms, normal Scottish limited companies. This generates a lot of post.

The ten new companies all have a different director and person of significant control, including Romanians nationals.

It was Graham Barrow, a financial crime expert, who spotted the formations. It is not, after all, normal for 10 transport companies to appear simultaneously at neighbouring flats.

Barrow in recent years has been monitoring the sheer volume of new firms being registered through the UK’s corporate registry. There are now 4.4m altogether, most costing just £12 to create.

Barrow reckons a fifth of all firms being formed have no legitimate economic purpose. And perhaps as many as 150,000, he believes, are bogus, fronts for simple scams under which foreign or local fraudsters set up companies, take out an overdraft in their name and scarper.

This is not a victimless crime. Tenants can be left with debts on their addresses - and even their own names, used without their knowledge of permission.

All across the four nations of the United Kingdom, and without their prior knowledge or consent, companies are being registered at people's addresses often using other people's names,” Barrow explained.

“Because this can be done from the comfort of a computer, anywhere in the world, there is no part of the Uk that is exempt from this problem.

And the real cause for concern is that, once a company is resident at your address, or once your name appears on the corporate register, either could be used to gain loans, overdrafts, state benefits or other financial products, often at the expense of your credit rating and, occasionally causing the appearance of the bailiffs at your front door to reclaim unpaid debts about which you know nothing.”

The Aberdeen pattern is repeated across Scotland. There were a dozen transportation firms, for example, registered at two flats in a tenement in Dennistoun, Glasgow, in June alone. Nobody was at home at those properties when the Herald visited last week. This time most of the names said to be directors were Scottish.

Earlier this month Barrow helped BBC Radio 4’s You and Yours reveal that there was a street in Oldham, Greater Manchester, where bogus companies registered at almost every home on a single day. Most had “cleaning”, “build” or “construct” in their name and a single director. A resident told the programme of her efforts to have companies removed from her address. She complained to Companies House. She was told she would have to wait while those who registered the business were given 28 days to object to their firm being re-located.

The latest boom in bogus companies may suggest criminals have access to mass personal data, including names and dates of birth of residents. Residents - such as the Romanian tenants in Aberdeen - only discover their homes have been targeted when big fat envelopes start arriving from Companies House or HMRC.

Barrow’s discovery has again raised more concerns about how easy it is to form a company in the UK - and just how few checks are carried out on the accuracy of corporate filings, including names and addresses.

Yesterday The Herald revealed that a teenager had created an entire transport empire, on paper, by cloning the names of major bus and train operators. The young man, who The Herald is not identifying, set up his own versions of firms like Stagecoach, Alexander Dennis, Wrightbus, Go-Ahead, Govia and Southern Railways. Sometimes he even used the address of the companies he was mimicking.

Big businesses are now in the expensive process of challenging his use of their addresses and names.

Five years ago we revealed another man had cloned some of the world’s largest alcohol makers, including Scotland’s biggest whisky brands. Tofik Ovaysi briefly convinced a town in Ukraine that he was the “baron of spirits” and about to invest in a vodka distillery.

There is a long history of people setting up cloned or fake companies, even for a joke. The now late Edinburgh company formation agent John Hein was fond of this prank.

He registered the United States of America Limited at his rundown flat in the city, which he renamed the White House. But he also registered Scotrail Limited at his home, which he also called Scotrail House, - and frequently got mail for the national rail company.

“I have always been a railway enthusiast,” Hein joked back in 2018. “I have lots of railway companies but unfortunately no actual trains or tracks to play with, just a pile of papers.”

Experts say such clones and fakes are the result of Britain’s lax corporate governance.

The latest revelations follow concerns about the abuse of Scottish limited partnerships - the firms dubbed Britain’s homegrown secrecy vehicles - for everything from petty pilfering to some of the biggest money-laundering schemes of all time. There are homes all over Scotland which are the witting or unwitting HQs of SLPs. That includes Hein’s former White House, where thousands are based.

Transparency campaigners believe Britain’s corporate registry, Companies House, is effectively an “honesty box” open to abuse by comics, cranks and criminals. The UK Government has repeatedly promised to beef up the registry’s powers to check information and some reforms are on their way.

Right now all Companies House checks is if all the right boxes have been filled in and its modest fee has been included. It does not verify what those registering firms are claiming. It can, on application, move a company away from an address, to a default HQ at a Companies House base in Edinburgh, Belfast or Cardiff, That has already happened with the clones of Southern Railway and Alexander Dennis.

Earlier this year the Conservative government at Westminster - which is responsible for all corporate law and oversight - published a White Paper under which Companies House would get powers to reject applications to form companies if presenters provided false or unverifiable information. Tory proposals would also pave the way for Companies House to develop information-sharing schemes with law enforcement.

Companies House does not comment on individual cases. In a statement, it said: “Companies House carries out checks to ensure filings are complete, but at present, the Registrar of Companies has no legal powers to verify or validate the information which is delivered to her. Provided a document appears to meet the requirement to be properly delivered, the Registrar must register it.

“Companies House is aware of the misuse of the Company register to support illicit activity and recognises the difficulties faced by those affected by this. Where potential criminal activity is identified, Companies House works closely with law enforcement agencies to refer matters and support investigations.”