How British partnerships supply Russia during the war

11 December 2023 13 minutes Author: Cyber Witcher

How British LPs contributed to imports to Russia

The article reveals how UK Limited Partnerships (LPs) acted as brokers in thousands of cases of importing goods to Russia following Russia’s full-scale invasion of Ukraine in February 2022. Despite UK sanctions aimed at neutralizing Russia’s military efforts, LPs were found to have acted as intermediaries in more than 17,000 imports into Russia, of which more than 600 shipments were of goods deemed by the EU and its partners to be “high priority” battlefield components. potentially ambiguous and sanctioned elements that can help Russia in its invasion of Ukraine​​​​ This raises questions about the effectiveness of the UK sanctions regime, as thousands of consignments of goods ranging from auto parts to electronics, timber, wine and tobacco have been imported into Russia using UK LPs as consignors.

These LPs, mostly incorporated in Scotland, have an opaque structure that makes it difficult to identify the true owners of these partnerships.​​​​​​ The investigation also includes an analysis of the Harmonized System (HS) codes attached to the shipments, revealing the nature of the imported goods continued from the last word and the possibility of these goods being used for military purposes. It turned out that among the imported goods were components that could be used in the production of military equipment, including parts for radar systems, optical instruments and other high-precision equipment. This indicates a potential violation of sanctions and abuse of commercial mechanisms to support Russia’s military needs.

Between sanctions and secret deliveries

In the run-up to Russia’s full-scale invasion of Ukraine in February 2022, UK limited companies (LPs) were named as brokers in thousands of records detailing imports to the belligerent state. Great Britain introduced a series of sanctions aimed at denying Russia’s war effort. However, experts have long argued that these corporate arrangements, which are easy to set up and can be used to hide ownership under English common law, are fueling unchecked illegal activity in global financial markets.

An analysis of publicly available import and export records revealed that:

  • From February 24, 2022 to March 31, 2023, UK Limited Partnerships acted as an intermediary for more than 17,000 imported goods to Russia.

  • None of these Partnerships have controlling partners or persons with significant control in the UK.

  • More than 600 of those shipments are for items the EU and its partners have designated as “high priority” battlefield components, potentially dual-use and sanctioned items that could assist Russia in its ongoing invasion of Ukraine.

  • The 3,211 items exported to Russia contained items included in the “universe of critical components,” a term used by the pro-Ukraine International Working Group on Russia Sanctions to describe components found on the battlefield.

“We have imposed the most extensive and severe economic sanctions ever imposed on a major economy, and have significantly reduced exports of British products to Russia,” said a representative of the UK’s Department of Trade.

“While we cannot comment on individual cases, we are clear that UK companies that directly or indirectly sell or export sanctioned goods to Russia may be in breach of sanctions laws and face large fines or prison terms.” The government’s Financial Crimes Bill received royal assent last month, introducing new rules on LPS, but has not yet been implemented.

A series of simple searches of the Internet Import Database revealed that LIMITED LIABILITY COMPANIES (“LPS”), registered mainly in Scotland, had acted as intermediaries for over 17,000 imported goods since the start of the war. Those with significant control outside the UK and the EU (“CPOs”) and the widespread use of controlling partners in secretive jurisdictions make meaningful attempts to identify the true beneficiaries of these partnerships virtually impossible.

The nature of these deals and the opaque nature of the limited companies involved raise questions about the effectiveness of the UK sanctions regime. On 2/24/2022, the United Kingdom announced a series of sanctions against Russia, including legislation banning the export of “all dual-use goods to Russia.”

Following the announcement, thousands of consignments of goods ranging from auto parts to electronics, timber, wine and tobacco were brought into Russia with the help of British shippers. LIMITED LIABILITY COMPANIES participating in the PSC, where listed, are located primarily in Russia, Eastern Europe or countries beyond the reach of British authorities. None of them are in the UK, and there are only a few in the European Union.

Screenshot of data obtained from ImportGenius showing shipments made by UK LPs (Source: ImportGenius)

Obtaining these import records was easy and inexpensive. Data processing firm ImportGenius maintains a database of customs records in various territories, including Russia. According to its website, the company obtains data on Russian trade from legally obtained closed sources. This database is searchable, and the complete dataset of Russian imports was available for a fee of US$99.

A simple search for “LP” turned up tens of thousands of shipping records. To focus on imports made after the full-scale Russian invasion of Ukraine, this investigation used only records registered after February 24, 2022. There are currently no current records, and our research covers the period from the start of the war to March 31, 2023.

HS Code Hack

Analysis of the Harmonized System Code (HSC) attached to the shipment indicates the nature of the imported goods — the HSS code is used to classify goods sold and is used by the World Customs Organization. Export regulations are complex and it is difficult to determine which goods are dual-use goods, further complicating the issue in the codes attached to them, and the description of the exporter’s own goods is due to the opaque nature of the LPS that act as shippers in these agreements.

However, the government’s own statements indicate that a number of supplies may require further scrutiny. The EU and its international partners list a number of HS codes they consider “high priority” for goods “found on the battlefield in Ukraine or critical to the development, production or use of these Russian military systems.” These include items such as ball bearings, static transducers, television cameras, aerials, plugs and sockets.

All these supplies were arranged for export to Russia through the British company LP in the early years of the war. During the specified period, 678 export deliveries were made to Russia using Great Britain as the sender under these codes. The arrival date in the data indicates that these shipments were successful.

In 2022-8-28, a 5,000-kilogram static converter, which converts direct current into alternating current and is included in the priority list, will arrive in Moscow with a cargo supported by SLP, whose managing partner is based in the Seychelles and PSC is a citizen of Russia. During this period, 146 separate deliveries of static converters were made.

In a report published on July 3, 2023, the International Working Group on Russian Sanctions listed 385 HS codes that make up the “universe of critical components,” components of dual-use items found on the battlefield in Ukraine. The working group consists of 60 pro-Ukrainian academics, including Michael McFaul of Stanford University, a former US ambassador to Russia.

During the specified period, 3,211 export goods using these TN codes were sent to Russia. Bellingcat is an independent financial expert on illicit finance who has examined the UK and Scottish reports. Details of the shipment were included in the Burke dossier. “I am very concerned about many of these TN ZED codes,” the file said. “You know, thermostats for saunas.

Great, it’s also what’s used to make explosives. It is necessary to control the temperature and humidity. Dual use. So. He added that the growth in the number of LIMITED LIABILITY companies makes it very difficult to scrutinize this activity because of how easy it is to set up and protect offshore companies. “This type of sanctions violation is complex and requires a multi-disciplinary team that understands shipping, maritime law and international treaties,” Files said. “You’re trying to take 1 ounce of bad water out of a storm drain. There’s advice, and you need to check more often, for example, whether the organization was incorporated in a convenient jurisdiction.”

What is a UK limited company?

Most of the limited companies involved are located in Scotland (“SLPs”). SLPs have legitimate business applications, but their opaque ownership, lack of reporting requirements, and tax transparency have been used in a list of major money laundering and a wide range of illegal activities around the world since at least 2014.

Previous reports by Bellingcat and other publications have shown that the number of SLPs increased dramatically in the mid-2010s, with at least 71% of SLPs registered in 2015 controlled by partners in classified jurisdictions. These are territories whose regulations allow individuals or legal entities to evade the regulations of other jurisdictions.

Thus, SLPs have been a useful component in transnational money laundering schemes. They were involved in the Global Laundromat, siphoning $20 billion to $80 billion out of Russia over four years, the Moldovan bank raid in which $1 billion disappeared from three Moldovan banks in 2014, and the Azerbaijan Laundromat, a scheme where 2.9 billion dollars were withdrawn. was routed through European banks and companies.

“Since the turn of the new millennium, UK limited companies have been targeted by the global elite to help source and move corrupt funds through the financial system,” said Graham Barrow, money laundering expert and director of The Dark Money Files. “Whether it’s creating shell companies to win government contracts in former Soviet states, holding significant assets as a way of disguising ownership or creating bank accounts to move huge flows of dirty money around the world, UK limited companies have been one of the most popular partnerships. the essence of “going to”.

This has not gone unnoticed by the UK government, which launched a public consultation on limited company reform in 2018. Last year, the government said it was “aware of reports of misuse by some limited companies… and intends to crack down on their misuse”.

On 26.10, a new law was approved, the bill on combating economic crimes and corporate transparency introduced provisions for partners, such as the obligation of partners to provide additional identifying information. However, these rules have not yet entered into force and have not affected the activities of the limited liability companies participating in this report.

“Given that the registration requirements are minimal and there is no requirement to provide an account, it is not difficult to understand why the records were used for illegal activities,” Barrow added. “Even more difficult to understand is the slow nature of the UK government’s response when it became clear to interviewees how widespread its use in money laundering networks had become.”

Registration documents for one of 45 albums. Belize is a common location for partners (Source: Companies House )

Outsourcing control

A total of 45 LPS from Scotland, England and Northern Ireland acted as consignors for the export of 17,425 consignments during the specified period. Everyone has registered an office in the UK, but that’s where all contacts with the UK end. Neither has a UK managing partner or Psc, the most popular country of origin for partners is Seychelles, followed by Belize, with both countries accounting for 42% of joint partners. 26% of managing partners are located in Eastern Europe.

SLPs have limited application requirements, do not require an account to apply and are not taxed in the UK. Partners pay taxes to the authorities of their country. Thus, despite these volumes of supply, the UK does not benefit financially from the existence of these partnerships.

This cannot be said about the Russian economy. Exports during the Period included more than 5,000 batches of wine. Although expensive luxury goods are subject to export restrictions based on their value, there is no evidence that any of these consignments meet this threshold. However, it is noteworthy that the Russian state increased the duty on imported wine from “enemy countries” during the war (from 12.5% to 20%).

Some of the reviewed LPs emphasize the need for reforms. One SLP, naming another SLP as a person of significant control (PSC) and being controlled by a general partner in Belize, filed for dissolution three times, but still found time to ship four tons of pipe fittings to St. Petersburg. Current rules, pending change in a new government bill, do not allow SLPs to be struck off the register of companies, meaning SLPs can apply for dissolution multiple times while continuing to operate.

The most prolific LP during this period was Premium Trading International, a now-dissolved partnership based in Scotland. The partnership was controlled by a general partner in the Seychelles and its PSC was a Russian citizen who listed her mailing address as the formation agent’s office in Edinburgh. The firm was founded in 2015 by Lawsons & Co, a now-defunct formation agent also responsible for setting up companies allegedly linked to the 2014 raiding of a Moldovan bank, Troika Laundry and Russian Laundry. It is not suggested that Lawsons & Co knew the purpose of the many limited companies they formed, nor the details of individual supplies.

During this period, Premium Trading International recorded imports to Russia of 4,873 consignments, which is 27.9% of the total number of deliveries during this period. He acted mainly as an intermediary between Chinese suppliers and Russian companies. According to reports from ImportGenius, these shipments consisted mainly of various auto parts. The UK government’s own sanctions rules are complex and cover a wide range of goods that are constantly changing, but potentially dual-use goods require an export permit. Under these circumstances, it is not clear whether Russian PSCs, partners in the Seychelles or Chinese importers are licensed by the relevant authorities.

Of the deliveries made to Russia during the specified period, a significant percentage was made up of components for the production and maintenance of vehicles. These include cylinders, gaskets, internal combustion engine parts, control panels, electrical circuit parts and a wide range of mechanical and electronic components used in the production of vehicles. Most of these parts are not included in the list of EU “high priority” goods, but many of them are included in the list of TN EZ codes published in the report of the international working group on sanctions against Russia for 2023-7.

The government’s Anti-Economic Crime and Corporate Transparency Bill, which aims to address some of the problems associated with LIMITED LIABILITY companies, is expected to come into force in the coming months with assent from the Royal Family on 26.10. The impact this has on the wider global abuse of corporate vehicles in the UK has yet to be seen.

Based on currently available public sources, it is clear that trade was still thriving in the early years of the Russian invasion of Ukraine. “I look at these things and say, after 40 years in finance, 30 years of investigations, I can’t find gems, but I smell poop,” the financial investigator’s file says.

Інформація взята з відкритих джерел “Bellingcat”.

Other related articles
Found an error?
If you find an error, take a screenshot and send it to the bot.