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‘Maybe a couple of hundred’ in sham director network

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It should not be too difficult to stop abuses in the ‘nominee director industry’, according to a journalist who has estimated that a global network of about 200 ‘sham directors’ is moving ‘from one jurisdiction to another’ to evade authorities.

The BBC’s Panorama programme titled ‘How to dodge tax’, broadcast last night, set out to show how some of the UK’s 2,500 corporate service providers ‘really do business’. The potential crimes discussed in the programme were not limited to tax evasion.

Most corporate service providers have nothing to do with criminal activity, HMRC said. The BBC’s reporter Darragh MacIntyre acknowledged that nominee directors were ‘people who can legitimately be appointed to run companies on behalf of others’. However, some nominees were ‘not running anything at all’ and would not even see documents signed in their names.

MacIntyre made a brief reference during the programme to a statement issued by Vince Cable, the business secretary, hours before the programme was broadcast.

As Tax Journal reported yesterday, The Guardian quoted Cable as saying his department would ‘investigate fully any specific allegations and ensure that appropriate action is taken’.

However, Cable was conscious of ‘the need to avoid additional burdens being placed’ on the vast majority of companies and directors who comply with the law. ‘We are therefore focusing our attention on those who deliberately seek to contravene it,’ he said.

In one investigation involving secret filming, Panorama alleged that ‘Tony’, an undercover reporter posing as a ‘tax dodger’, was offered ‘complete confidentiality in an offshore tax haven, and a way to control his money in secret’.

Panorama showed its evidence to a ‘leading barrister specialising in white collar crime cases’. Jonathan Fisher QC, a regular contributor to Tax Journal, told MacIntyre: ‘It’s simply a camouflage, so that the authorities don’t know who’s holding the money.’

Fisher added: ‘If this proceeded, and the company was set up in the way which is being discussed, then plainly some very serious criminal offences would be committed.’

MacIntyre said the ‘potential crimes’ would be ‘helping “Tony” cheat the [public revenue] and launder the proceeds of crime’.

A ‘global’ network of individuals and companies offering ‘sham directors’ was moving from one jurisdiction to another to evade authorities, said Gerard Ryle of the International Consortium of Investigative Journalists. ‘You’re talking about maybe a couple of hundred nominee directors, so if they were all rounded up they’d probably fill a jumbo jet – if the authorities really wanted to stop this, it wouldn’t be that difficult.’

But on paper at least, MacIntyre said, these sham directors ran ‘many thousands of companies worldwide’.

Yesterday The Guardian reported that more than 21,500 companies had been identified using a group of 28 ‘so-called nominee directors’. It published a table showing, for each individual, the numbers of ‘current and former companies’ across four countries – the British Virgin Islands, Ireland, New Zealand and the UK.

HMRC regulates 2,467 registered trust or company service providers in the UK, BBC News reported. MacIntyre quoted HMRC as saying in a statement that it carried out inspections based on intelligence and risk assessments. Most corporate service providers had ‘nothing to do with criminal activity’, and if HMRC found evidence that money laundering regulations had been breached, action would be taken.

An HMRC spokesman told Tax Journal today: ‘Relevant businesses are required by law to act against money laundering. They must report any suspicious activity to SOCA for investigation. Supervised businesses must have in place the right procedures to prevent money laundering, before they begin to trade and to do due diligence on their customers. They must keep records of transactions, and have robust internal control systems in place to identity doubtful transactions.

‘Supervised businesses must ensure their staff are trained to know what the risks are, and how to report any suspicious activities.

‘We check the rules are being followed and take action against unregistered businesses based on intelligence we receive and our own risk assessments.’