Scots firm accused of supporting Russian military and security services
The Scottish limited partnership, registered at an address in the heart of Edinburgh’s New Town, has been placed on a trade blacklist alongside scores of Russian firms as part of efforts by officials in Washington to “degrade Russia’s ability to acquire the items it needs to sustain its military aggression”.
The development will intensify pressure on the UK government to overhaul lax financial governance structures, particularly around SLPs, which have been linked to numerous international money laundering rings and mercenary organisations, as well as drug trafficking and child pornography operations.
Ian Murray, Labour’s shadow Scottish secretary, said the revelations surrounding the Scots firm were “deeply alarming”, while Alison Thewliss, the SNP’s shadow chancellor, said the situation demonstrated the need for “urgent” reforms of Companies House. She urged the UK government to follow the US lead and blacklist the firm.
According to Companies House filings, the SLP in question, known as Djeco Group, was set up nearly three years as a holding partnership of two Maltese firms, one of which - MaltaRent Ltd - purportedly supplies equipment and services to filmmakers.
However, officials from the US defence and state departments, together with colleagues from the US Department of Commerce (DoC), ruled that its activities were tied to Putin’s increasingly isolated regime.
The latter department said the decision to blacklist it and 91 other firms - all but 15 of which are based in Russia itself - was “based upon their involvement in, contributions to, or other support of the Russian security services, military and defence sectors”, as well as research and development efforts for the military.
Thea Rozman Kendler, assistant secretary of commerce for export administration at the DoC’s bureau of industry and security, said the restrictions on Djeco Group and the other companies would “further erode Russia’s ability to finance its military and punish those who seek to support them”.
While Russia’s war on Ukraine has expedited efforts in the UK to clamp down on dirty money, the details of Djeco’s alleged support of the Russian military apparatus highlights the extent - and urgency - of the problem.
The company - one of three UK firms placed on the entity list - is registered to an address at a handsome three-storey office building in Edinburgh’s Thistle Street, but the opaque nature of SLPs - obscure corporate entities which have their own separate legal personalities - means that the identity of its beneficial owner is unknown.
Companies House filings list Evgeniya Bernova as a person with significant control (PSC) over Djeco Group. A LinkedIn profile in the 48-year-old’s name states that she is the CEO of MaltaRent, and a graduate of the Diplomatic Academy of the Russian Ministry for Foreign Affairs. She did not respond to enquiries from Scotland on Sunday.
Ms Bernova was one of two partners named as registering Djeco Group in 2019, the other being Sauerborn & Sauerborn Ltd, an SLP registered at the same Edinburgh address. It ceased to be a partner of the Djeco SLP in July 2020, when it was replaced by DWP Services HK Ltd, based in Hong Kong.
According to Graham Barrow, a veteran anti-fraud consultant and money laundering expert, Djeco is one of 125 SLPs registered at the Edinburgh address. He said that the weak reporting rules around the entities created “a perfect storm of opportunity for obfuscation and opacity”.
“In addition to the woeful lack of filing requirements, the only thing required to maintain the SLP on the register is an annual confirmation statement,” he explained. “No accounts need be filed and there is no check on the information that is provided. If a SLP says it does not have a PSC, no one will check. If it provides the name of a PSC, plucked from thin air, no one will check.”
Mr Barrow, co-host of the Dark Money Files podcast, added: “It's hard to think of a more straightforward mechanism behind which to hide difficult identities or to mask suspicious financial activity from prying eyes.”
With corporate law a reserved matter, the issue of SLPs has come under renewed scrutiny at Westminster in the wake of Russia’s aggression. The US action against Djeco is expected to add to that.
The anti-corruption watchdog, Transparency International, which describes SLPs as “the UK’s home-grown corporate secrecy vehicle”, said the development highlighted the need for urgent action.
Steve Goodrich, the group’s head of research and investigations, said: “Our research has shown how SLPs have enabled a wide range of financial crimes, including moving large amounts of suspect funds out of Russia.
“So long as Companies House remains an honesty box, where those setting up firms can submit false information with little recourse, they remain wide open to abuse by criminals and kleptocrats.
“Ministers have pledged reform later this year, but given the current context and what is at stake, these changes can’t come soon enough.”
Mr Murray, who has argued that Companies House reforms should have been incorporated in the new Economic Crime Bill, said the allegations against Djeco represented “yet another example of the unscrupulous activities of SLPs which are aided by outdated legislation allowing them to obscure their true owners”.
He added: “The results of this investigation are deeply alarming. The UK government must examine Djeco Group further to ensure that no entity which is assisting Putin’s regime is able to operate with impunity in the UK.”
Ms Thewliss, who has been calling for reforms of SLPs for the past five years, said: “The case of Djeco Group illustrates the very complex web which can be spun using SLPs.
“They have been abused for many years now for a range of nefarious activities including bribery, corruption and arms deals, so it isn’t a great surprise to find this one linked to Putin’s regime. If the US authorities have blacklisted Djeco, the UK must now follow suit.”
She added: “The UK government and Companies House should now be reviewing all SLPs and PSCs to strike off those directors who have been sanctioned. The difficulty in all of this is that the Companies House register is not fit for purpose, and the information contained within it isn’t verified.
On Wednesday, the Scottish secretary, Alister Jack, promised that “further measures” will be taken to crack down on SLPs.
Responding to calls from Mr Murray to “shut down laundering loopholes,” Mr Jack told the Commons: “We do want to do more, and early in the next session of parliament, there will be an updated Economic Crime Bill, and there will be further measures being taken.”
Mr Jack said previous reforms to SLPs in 2018 “increased transparency” and imposed “more stringent checks” on those individuals who formed the firms. However, there are more than 200 SLPs that have yet to declare a PSC, and just one firm has been penalised for failing to do so - it received a fine of £210.
Asked if the UK government was aware of the US allegations against Djeco Group, and what action was being taken to scrutinise it and other SLPs for potential Russian ties, the Treasury referred Scotland on Sunday to the Foreign, Commonwealth & Development Office, which said it did not comment on future designations.
The Department for Business, Energy & Industrial Strategy did not respond to enquiries.
A message from the editor:
Thank you for reading this article. We're more reliant on your support than ever as the shift in consumer habits brought about by coronavirus impacts our advertisers. If you haven't already please consider supporting our trusted, fact-checked journalism by taking out a digital subscription.
Want to join the conversation? Please or to comment on this article.