#relationshipscams | #dating | Will the e-money boom make the UK a hub of money laundering?

COVID is killing cash. Even as lockdowns loosen, consumers are turning away from notes and coins like never before.

A survey in April found four out of five Britons – many forced to do all their shopping online – were considering new digital ways to pay.

Some are turning to ‘e-money’, with a raft of new money-handling products aiming to challenge industry leader PayPal.

From a health point of view, this is safer than handling cash and visiting shops. But, anti-corruption researchers warn, the boom in e-money poses another risk: money-laundering.

There are already concerns that regulators, including British ones, failed to keep close tabs on German payments giant Wirecard, which went bust two weeks ago.

The UK’s watchdog, the Financial Conduct Authority (FCA), for a few days even froze some £500 million in customer money at the firm’s British subsidiary, while it made sure the money actually existed.

Now an investigation by openDemocracy reveals UK-regulated electronic money institutions, or EMIs, are being touted as a replacement for networks through which billions of dollars of dark money moved in and out of the former Soviet Union.

Our research follows individuals and institutions who were linked with Baltic banks that were fined for enabling – or failing to prevent – industrial-scale money-laundering. We’ve found that some are moving into the British e-money business, complete with a stamp of approval from the FCA.

And we have found an open Russian-language internet trade in UK shell companies with EMI accounts, EMI licences and even an anonymous EMI provider on offer for £1 million.

Anti-corruption group Transparency International believes the sector poses an emerging threat in the battle to stop criminals from cleaning or moving their dirty money.

The next Russian laundromat?

For years corrupt officials, criminals and tax-avoiding entrepreneurs used anonymously held ‘shell’ companies (often registered in the UK or its territories) to open bank accounts in the Baltic states.

This relatively simple scheme enabled some of the biggest laundering schemes ever exposed, such as the multi-billion-dollar ‘Russian laundromat’, revealed in 2014, and similar pipelines for dark or dirty money out of Azerbaijan and Ukraine.

The huge flow of money through this machinery is thought to have reduced to a trickle since a 2018 crackdown in Latvia on banking for people who do not live in the country.

But now an alternative route has been suggested: EMIs, including those registered and regulated in the UK.

There is a cottage industry advising people and business in the former Soviet Union about offshore structures. It is pretty frank about this shift to British EMIs.

Back in 2018 the Russian-language site Zapiski ob Ofshorakh (‘Notes on “offshores”’) set out the pros of various EMIs, including UK-regulated ones. And its explanation for why it was doing so could not be blunter.

It said: “In connection with the mass closures of non-resident bank accounts in Baltic states – and the growing difficulty in working with foreign banks – some entrepreneurs are looking to open corporate accounts in payment systems.”

The message: it is now harder to move money – including dirty or untaxed money – through shell firms and Baltic banks, so try EMIs instead.

The site sells shell companies, including the now-notorious Scottish limited partnerships or SLPs, dubbed Britain’s “home-grown secrecy vehicles” by Transparency International.

One of the site’s specialists even boasts in a recent video how clients can set up an SLP and then have a credit card issued by an EMI sent to the firm’s proxy address in Scotland and from there on to Russia or Ukraine.

Moreover, other sites offering offshore services to a largely Russian-speaking market are going further.

IQD Consulting has been offering to sell an unnamed British company complete with an e-money licence. The price tag? £1 million.

The vendor also markets British and international shell companies, including Scottish limited partnerships, complete with accounts at British banks or EMIs.

IQD did not respond to a request from openDemocracy for comment. It did, however, remove its English-language offer for the e-money company after we got in touch.

The website is owned by a limited partnership called Lacerna registered in Dublin. Irish limited partnerships do not need to declare a beneficiary so there is no way of knowing who owns or operates the site.


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