05 Nov 2019
Britain is known for its strong rule of law. Yet London is also a global hotspot for money laundering, tax evasion and other financial crimes. Experts say that a no-questions-asked approach to opening U.K. companies has exacerbated this problem.
However, the U.K.’s transparent registries and its freedom of information laws make it easier to detect potential wrongdoing than in many parts of the world, including Ukraine.
And that may become a problem for Ukrainian billionaire oligarchs Ihor Kolomoisky and Hennadiy Boholyubov, who face a London civil suit alleging they used fake purchasing agreements and fraudulent loans to embezzle $1.72 billion from Ukraine into offshore firms through three U.K. companies.
A Kyiv Post investigation has uncovered two accountancy firms, a law firm and multiple individuals in the U.K. and Cyprus connected to these companies that may have played a role in the alleged scheme.
PrivatBank — Ukraine’s largest lender, co-owned by Kolomoisky and Boholyubov until its nationalization in 2016 — claims a total of $5.5 billion was looted from the bank into offshore holdings. The Ukrainian central bank and Ministry of Finance said the bank faced insolvency without a bailout financed by Ukrainian taxpayers.
Since then, state-owned PrivatBank has been suing its former owners in the U.K., U.S. and Cyprus, trying to reclaim its assets. PrivatBank’s total claim in the U.K. was $1.9 billion, which has ballooned to at least $3 billion as interest and legal costs accrued. The London case is built around three U.K. companies involved in the alleged schemes, which fall under U.K. jurisdiction.
Lawyers acting for the bank claim that $721 million was embezzled through the firm Collyer Ltd, $494 million via Teamtrend Ltd, and $501 million went through Trade Point Agro Ltd, to offshore companies owned by the defendants in locations like Cyprus and the Carribean. Another $100 million was allegedly funneled through three more companies in the British Virgin Islands (BVI).
PrivatBank allegedly “loaned” the funds to 42 Ukrainian shell companies connected to the defendants and incorporated in different offshore havens in the Caribbean.
According to a recent judgment from the U. K. Appeal Court, Kolomoisky and Boholyubov accept that there is “a good arguable case that the Borrowers (in Ukraine) and the English and BVI Defendants were knowing participants in the fraudulent scheme” and the three English companies and three BVI companies were “at all material times owned and/or controlled” by the defendants.
Despite that, Kolomoisky and Boholyubov have repeatedly denied any wrongdoing in relation to PrivatBank. They maintain that the state takeover — backed by the International Monetary Fund — was politically motivated.
The three English firms under scrutiny appear to be shell companies. But behind them are a number of real accountancy and law firms in the U.K. and Cyprus.
Collyer Ltd is registered to the North London address of NA Associates, an accountancy firm with strong ties to Cyprus and majority-owned by a well-known British Cypriot accountant, Nicholas Antoniou. Some 412 firms with ties to the U.K. and Cyprus have been registered at the firm’s address.
Teamtrend Ltd. is registered to the Central London address of Edwin Coe LLP, a major law firm. Another 81 companies are registered there.
NA Associates has acted as the accounting firm for both Collyer and Teamtrend, according to both companies’ documents in public registers.
Trade Point Agro Ltd. is registered at 869 High Road, North London. A property title acquired from HM Land Registry by the Kyiv Post shows that the building was purchased for 800,000 pounds, and this purchase was financed by a London-based bank with ties to Cyprus, Cynergy Bank Limited. Until recently, it was the U.K. subsidiary of Bank of Cyprus.
Property titles show that the building is owned by four individuals of Cypriot origin: Evagoras and Maria Evagora and Andreas and Erene Christoforou. The address is also home to the accountancy firm EA UK LLP and the Cypriot names of the building owners appear multiple times throughout its company records and filings. The accounting firm has registered some 545 companies.
Edwin Coe LLP, NA Associates and EA UK LLP did not respond to multiple requests for comment and did not answer questions about their ties to Collyer, Teamtrend or Trade Point Agro.
PrivatBank and its lawyers declined to comment on the Kyiv Post’s findings, stating that many elements of the ongoing proceedings remain confidential.
Limited liability companies are popular tools in the U.K. because their accounts do not have to be audited, according to Graham Barrow, a London-based banking and anti-money laundering expert.
“Potentially, you could just shove a set of books in front of an accountant’s firm and they can say ‘on the basis of what we see, these are fine,’” said Barrow. Companies reviewed in this way would not be considered audited.
Collyer and Teamtrend filings show that NA Associates signed off on the books of both companies for a number of years but has not audited or reviewed them. In 2016 for Teamtrend and 2017 for Collyer, NA Associates noted in its accounting that it did not accept responsibility for the companies’ bookkeeping.
Those years came after details of the alleged fraudulent PrivatBank scheme had already been made public.
“It is your duty to ensure that (the firm) has kept adequate accounting records,” the accountancy wrote then as a disclaimer on the books. “We have not been instructed to carry out an audit or a review of the accounts… For this reason we have not verified the accuracy or completeness of the accounting records…”
Another possibility is that an accounting firm could prepare an account, knowing full well that it is false. That carries much more stringent penalties, Barrow said. “If an accountancy firm is actively involved, it would be preparing the accounts, often without having sight of the underlying bank statements or invoices.”
According to the expert, it is often the case that when a limited liability company shares an address with an accounting firm, it is because that firm “probably created the company in the first place.” But this is not always the case.
The Kyiv Post did not find any direct evidence of wrongdoing by NA Associates, Edwin Coe or EA UK, only a strong connection to defendant companies in the London proceedings.
Several directors, most of them from Cyprus, tie together the U.K. defendants and the lawyers and accountants with whom they share addresses.
Giannakis Savvidis is a Cypriot from the city of Limassol who has been listed as a director of Collyer since 2014 and of Teamtrend since 2017. Savvidis is also the director of Dagosel Investment Ltd, which owns a 5.21% stake in Kolomoisky’s oil refining company Ukrtatnafta, according to Ukrtatnafta’s 2018 financial statement.
Michalakis Tsitsekkos, another Cyprus national and lawyer from Nicosia, was named director of both Trade Point Agro (between 2007 and October 2019) and Teamtrend (between 2003 and 2017). He was also the director of the now-dissolved Andrena Great Ltd., which was a Cypriot company registered at 869 High Road London, the address of EA UK LLP.
By Jack Laurenson, Anna Myroniuk and Igor Kossov, Kyiv Post, 1 November 2019
Read more at Kyiv Post
RiskScreen: Eliminating Financial Crime with Smart Technology
Advance your CPD minutes for this content, by signing up and using the CPD WalletFREE CPD Wallet