By Gareth Vaughan
It seemed straight forward. Write one article outlining the ongoing problems, and write a second article proposing solutions.
That was the thinking behind my recent two part series on the ongoing headache caused by the use of New Zealand shell companies for dubious and nefarious purposes, and the misuse of NZ companies more broadly. (Here's Part 1 and here's Part II).
However, Richard Smith of Naked Capitalism both reminded me of, and pointed out the full extent of, the opportunities for questionable companies registered in the United Kingdom to exploit opportunities NZ's light touch company oversight regime offers. Hence the decision was made that a third article in the series was required. So here it is.
It is a tale of backdoor access to the NZ Companies Register via the UK. Effectively it's a classic cross jurisdictional regulatory arbitrage play. It involves taking advantage of two of the easiest countries in the world to start a company in, where there's also limited oversight of companies once they're registered.
To demonstrate how this works we have the case study of company incorporator and service provider TBA & Associates - Tax Business Advisors Limited, and one of its clients, - of whom there'll be much more later. Aside from NZ and the UK, the trail passes through companies in the Seychelles and Delaware, jurisdictions renowned for their corporate secrecy, and China.
TBA's man in Wellington
TBA, known as Eurofinanzza Investment Consultors Ltd until April 2016, is an overseas company incorporated in the UK, but registered on the NZ’s Companies Office's Overseas Register having been incorporated here on July 27, 2012. Unlike standard NZ companies, TBA is not required by the Companies Office to have a NZ or Australian based director. Instead TBA has a person authorised to accept service in NZ on its behalf.
In February 1994 the Disciplinary Committee of the New Zealand Society of Accountants ordered Cijffers be removed from the Register of Members of the Society, saying after February 28, 1997 he could apply for re-registration. This was after the Disciplinary Committee "found the charge proved" that Cijffers was a bankrupt.
Although not a member of Chartered Accountants Australia & New Zealand, nor of the New Zealand Institute of Chartered Accountants, Cijffers is still able to work as an accountant, just not as a chartered accountant.
TBA's directors are listed, in NZ Companies Office records, as Bernardo De Campos Vieira Simoes Correia and Luis Filipe Simoes Correia. The former gives a Canadian address and the latter a Spanish one. According to a UK Companies House filing, Luis Filipe is a 62 year-old Portuguese economist, and Bernardo a 21 year-old Portuguese business executive.
So what do we know of TBA? Its website says TBA & Associates Ltd is a registered company in the UK, with representative offices in Spain, Cyprus (described as its head office), the UK, NZ and the United States (in the tax haven state of Delaware). TBA says it provides "an array of services to international private clients as well as companies undertaking major cross-border business operations."
TBA's website notes its services include company formation in numerous jurisdictions including NZ. Of NZ company incorporation TBA says; "If properly structured, a New Zealand resident company can operate as a tax free international business company. There is great flexibility in the incorporation and management of a New Zealand company. It has no capital requirements and has a simple and fast incorporation procedure."
And on NZ registered financial service providers the website notes advantages to being "licensed" in NZ as a financial service provider include no minimum capital requirement, being recognised as a true onshore financial centre not blacklisted by any jurisdiction or authority in the world, experienced reliable professionals serving global clients with trust and company requirements including legal opinions on tax, trust and company matters, with the addition of reliable internet global banking services.
"New Zealand repealed its entire Banking Act in 1995 and thereby facilitated free entry into the business of financial services," TBA adds, noting if financial services are not offered to the NZ public, but presumably are offered somewhere else in the world, no prospectus, supervisory trustee or investment statement is required. (See all our articles on NZ's problematic Financial Service Providers Register here).
Below is what the homepage of TBA's website looks like.
TBA of the UK
And what of TBA, the UK company? TBA says it has no persons with significant control over the company even though its UK Companies House filings say Luis Filipe Simoes Correia holds 40% of the company's shares, enough to make him a person of significant control according to the official UK criteria.
Below is the UK address TBA provides, which is 2b Svs House, Oliver Grove, London.
Enter the Atrium
On the picture of TBA's website above you may have noticed the word "Atrium" in the top left corner. This is a UK company named Atrium Incorporation Services LLP.
This LLP, or Limited Liability Partnership used to be known as Eurofinanzza Incorporation Services LLP. It also lists no persons with significant control. Atrium's Companies House companies officers list features two active Seychelles companies being Highlight Consulting Ltd and KLT Systems & Technologies Ltd. Luis Filipe Simoes Correia was a company officer between June 2007 and July 2015. A tax haven, the Seychelles is notorious for hard to trace shell companies and is described as an offshore magnet for money launderers and tax dodgers by the International Consortium of Investigative Journalists.
Luis Filipe Simoes Correia is also director of another UK company, EuroFinanzza Tax & Business Advisors Ltd. EuroFinanzza, meanwhile, lists Eurofinanzza Investments LLC of Delaware as holding at least 75% of its shares.
The picture below is of the UK address EuroFinanzza and Atrium use, which is 95 Wilton Road, Victoria, London.
Eurofinanzza Investments LLC's website says it has a NZ office at 24B Moorefield Road, Johnsonville. This is the location of Private Box Ltd, a company providing virtual mail addresses, global mail forwarding, virtual office, and phone numbers and telephone answering services.
The client
As company incorporators and company service providers, EuroFinanzza/TBA has had some, shall we say, interesting clients.
The Euro Forex international investment scheme targeting Chinese investors with the help of NZ and UK registered companies, promising investors high returns through currency trading, was one. Covered in a series of articles by interest.co.nz here, Euro Forex was a pyramid scheme according to Chinese authorities, as Reuters subsequently reported.
An investor group in Shanghai collected details of at least 3,700 victims in China, and others in nine countries from the United States to the Philippines. Collectively, they claimed to have been fleeced of more than US$1 billion.
Reuters reported here that Eurofinanzza sold TWIC-Trans World Investment Corporation Ltd to Australian Bryan Cook with Cook asking for the company name to change to Euro Forex Investment Ltd. In 2015 Cook received a prison sentence in Germany for intentional sharemarket manipulation.
The Eurofinanzza owned New Zealand Capital Finance Ltd featured as the NZ agent for the NZ version of Euro Forex Investment Ltd, and another NZ company embroiled in the Euro Forex saga, PFS Pacific Finance Services Ltd. Both companies were registered in NZ in July 2012 on the overseas companies register as UK companies, with Joaquim Magro Almeida, said to be a 68 year-old Portuguese business consultant, presenting documents to the Companies Office on their behalf. EFIL - Euro Forex Investment Ltd - yet another UK company in the Euro Forex saga that found its way onto the NZ Companies Register, also appears to have come from the Eurofinanzza stable.
Even the Euro Forex UK successor company, FXCAP Futures LLP, complete with Seychelles companies as its officers, had a NZ offshoot whose agent was Eurofinanzza.
Meanwhile, Reuters reported in May that Chinese prosecutors had decided not to bring charges of fraudulent collection of funds against David Byrne, the British CEO of Euro Forex, because they didn't have enough evidence. Byrne had been apprehended in a citizen’s arrest by an investor and barred from leaving China. A series of YouTube videos I previously covered of Byrne speaking to investors showed him misleading them over the extent to which the Euro Forex companies, that doubled as financial service providers, were regulated in NZ.
In 2015 Naked Capitalism's Smith highlighted how Atrium appeared to be using stolen identities in photos of its alleged executive team. This was something Euro Forex also did, as I reported here.
'Euro Forex Investment Ltd was a company registered by our firm, under the instructions of our client Mr Bryan Cook'
I put a series of questions to both TBA and Cijffers. An emailed response from TBA business development manager John Hamilton acknowledged both Euro Forex Investment Ltd and Bryan Cook have been clients.
"Euro Forex Investment Ltd was a company that has been registered by our firm, under the instructions of our client Mr Bryan Cook. Our services has been exclusively in terms of registration of the company. We have not accompanied the company business, or their business activities, which is/should be out of our scope of business," Hamilton wrote.
"In terms of an eventual ultimate beneficial owner, we have never been informed or provided specific information about it. The sole people in direct touch with us have been Ms/Mrs Julie Cook, most probably, Mr Bryan Cook [sic] relative. [She is Bryan's sister]. Our corporate services ended end 2012, date we have completed our services in terms of the appointment of all company officers and members," wrote Hamilton.
Additionally he said; "All related and corporate information of the company is publicly accessible on the Companies House UK official website, where you will have direct and immediate access to all officers appointed, and having resigned, including copies of all corporate documents." It's not clear whether this part of Hamilton's answer addresses my questions about TBA itself, or about Euro Forex. And he didn't answer a question asking whether Fullerton Markets Ltd and Chanthrueen Sarigabani, a key figure behind this company, have been TBA clients.
Cijffers, meanwhile, declined to answer a separate series of questions put to him.
"There's no need to add anything to it [Hamilton's email]," Cijffers said. "There's no further comment from my point of view."
A sobering overview of UK company formation rules and oversight
Parts I and II of this series detailed the shortcomings of the NZ company registration system and light touch company oversight. We may have our problems, but in an international context the UK is NZ on steroids.
A report by Transparency International UK entitled Hiding in Plain Sight, how UK companies are used to launder corrupt wealth, gives a sobering overview of UK company formation rules and oversight.
"The UK is home to a thriving company formation industry and is a hub for professional corporate services. It is also one of the easiest places in the world to start a company, making it attractive to legitimate and illegitimate business alike. Costing as little as £12 and taking around 15 minutes to complete the forms, UK companies can be created on a large scale for a fraction of the price of those registered in other financial centres," Transparency International says.
"UK companies also carry a veneer of legitimacy due to the country’s well established global status. Alongside a range of corporate vehicles, the UK’s company formation industry also offers a variety of services, from so-called ‘nominee directors’ and mailing addresses – giving companies a layer of secrecy – to offshore bank accounts allowing access to the global financial system. Often there will be no trail whatsoever to indicate who sold companies which then go on to be misused."
"These factors have contributed to the UK featuring as a central location in which to set-up companies for laundering illicit wealth. Using open-source analysis, we have identified 51 major money laundering schemes made possible by the use of UK companies. Financially these scandals could amount to £80 billion or more in illicit wealth, with some of them threatening the financial stability of whole economies. The human damage inflicted on the victims of these crimes is still being counted," Transparency International adds.
"By analysing the trust and company service provider sector and past money laundering cases we have found that, far from being the first line of defence against money laundering, some of these businesses have either been unwitting accomplices or complicit enablers for financial crime."
"What we have found is that light-touch regulation is coming at a cost, both to the UK’s international reputation as a responsible place to do business, and in countries like Ukraine and Azerbaijan who suffer from rampant corruption facilitated by UK companies," says Transparency International.
The report provides 10 recommendations through three themes; being enhancing controls on UK company formation, increasing confidence in the UK company register, and overhauling the UK’s patchwork AML supervisory system. (The UK government has just unveiled plans for a new national economic crime centre to tackle financial crime and the estimated £90 billion of crime proceeds laundered through the UK annually).
'No checks, no ID, you're in (dodgy) business right away'
The deeply flawed reality of the UK Limited Liability Partnership (LLP) regime is also worth exposing, something Private Eye did in this special report. As Private Eye puts it; "It is easier to set up what is now the international criminal's corruption vehicle of choice than it is to open a bank account or rent a DVD. Fill in a form with some basic details of two or more 'members' in the LLP and send it off with a cheque for £40 to Companies House: no checks, no ID, you're in (dodgy) business right away."
Private Eye also points out the role of UK LLPs in the Paradise Papers, primarily comprising leaked files from law firm Appleby, in 'Shell shock' here. (There's information on how to register an LLP here, and a service here offering to do the work for you).
'If an objection is received, we cannot proceed with removal'
As of September, there were 2,283 companies on NZ's overseas companies register. According to the Companies Office, 1,659 of them were incorporated in Australia. All companies incorporated outside NZ that do business in NZ are required to be registered on the overseas companies register.
According to a Companies Office spokesman, there is no requirement that any companies on the overseas register have a NZ resident director. What they are required to provide are;
- The names and residential addresses of the directors of the company as at the date of the application for registration;
- evidence of the company’s incorporation, and a copy of its constitution;
- the address of the company’s principal place of business in NZ; and
- the full name and address of one or more persons resident or incorporated in NZ who are authorised to accept service in NZ of documents on behalf of the overseas company.
"If an overseas company is ‘large’, i.e. it exceeds the size thresholds set out in s45 of the Financial Reporting Act 2013, it is also required to deliver audited annual financial statements for registration," the Companies Office spokesman says.
"Amendments to the Companies Act which came into force on 30 May 2017 gave the [Companies] Registrar [Ross van der Schyff] the ability to initiate removal of overseas companies from the register where satisfied that it has ceased to carry on business in New Zealand. Since that time the Registrar has notified his intention to remove 341 overseas companies. The Registrar is required to give public notice of this and provided 20 working days for any objections to be lodged. If an objection is received, we cannot proceed with removal," says the Companies Office spokesman.
Most companies on the overseas companies register are legitimate companies doing legitimate business. It's just that this simple, backdoor entry is easy and convenient for both the legitimate and the non-legitimate to use. And for the rogues it's compounded by light touch regulation once the company's registered here.
'A policy conundrum for NZ'
Given the array of problems with UK company incorporation and oversight, why does the NZ's Companies Office put this country's reputation on the line by providing such a simple path for UK companies to the NZ Companies Register, and then minimal oversight of hybrid UK/NZ companies once they're established here?
As Smith puts it; "There’s a policy conundrum for NZ: as things stand, allowing any old UK company or partnership to register branches in NZ has the potential to completely unpick all the transparency reforms done in NZ over the past five years. A UK LLP can be registered for £35 to £100, so the overhead for someone who fancies both an NZ jurisdiction and complete anonymity is not huge."
"However, it looks as if the peak of this kind of abuse, in NZ, was back in 2012-2013. For the moment, this vulnerability is underexploited in NZ. In the UK we have a godawful mess that isn’t being tackled with any kind of systematic political will and resourcing - just eye candy legislation that is full of loopholes, and not enforced even when unambiguously flouted," says Smith.
Some food for thought for our new Labour Party led government.
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