The United Kingdom has been at the frontline of Western support for Ukraine since Russia launched a full-scale invasion of its neighbor in February 2022, enforcing a wide array of trade sanctions on the aggressor. And yet many of its businesses – particularly those registered as “limited partnerships” (LPs) under English common law – continued to act as intermediaries in thousands of export operations with Russia.
According to a new investigation by the collective project Bellingcat, British LPs represent corporate vehicles that encourage unchecked illegal activity on the global financial market.
Upon analyzing publicly available import and export records, Bellingcat has concluded that the UK LPs – registered mostly in Scotland – acted as intermediaries for more than 17,000 imports operations benefiting Russia between 24 February 2022 and 31 March 2023. None of these partnerships have controlling partners or persons of significant control in the UK.
As many as 678 of these shipments concern items flagged by the E.U., the U.S., and their partners as “high priority” battlefield components, potentially dual-use and sanctioned items that could assist Russia in its ongoing war against Ukraine. Further on, 3,211 exports into Russia contained items included in the “universe of critical components”, a term the pro-Ukrainian International Working Group on Russian Sanctions uses to define components found on the battlefield.
Thriving UK-Russia trade
Bellingcat obtained these import records from the data firm ImportGenius, which maintains a database of customs records across a variety of territories including Russia. This database is searchable and the full dataset of Russian imports costs 99 US dollars.
A simple search for “LP” revealed tens of thousands of shipping records.
To focus on imports made after Russia’s full-scale invasion of Ukraine, the investigators used only the records registered after 24 February 2022.
The shipments involved ranged from car parts to electronics, timber, wines, tobacco, and many others, Bellingcat found after the extraction of the Harmonized System codes, which are standard numerical identifiers used for classifying traded products and overseen by the World Customs Organization.
In a report published on 3 July 2023, the International Working Group on Russian Sanctions listed 385 HS codes making up the “universe of critical components”, components of dual-use items found on the battlefield in Ukraine, including thermal controllers, which are used to make explosives.
The top trader was named Premium Trading International, which assumed 4,873 shipments to Russia, or 27.9% of the overall shipments during the given period. It acted largely as an intermediary between Chinese suppliers and Russian businesses.
It is not clear which transportation routes dominated the illegal UK exports into Russia – by land or sea. The Bellingcat report neither reflected the value of the illegal trade between the two countries since the war began.
Outdated UK legislation
The major loophole with the British LPs is that English common law allows owners to provide limited personal information during the registration process, without bothering about background checks from the government.
“The widespread use of Persons of Significant Control (PSCs) outside of the UK and EU and controlling partners in secrecy jurisdictions makes any meaningful attempt to identify the true beneficial owners of these partnerships all but impossible,” says Bellingcat.
A total of 45 LPs in Scotland, England and Northern Ireland have acted as shippers in the export of 17,425 shipments during the given period. All have registered offices in the UK, but this is where any connection to Great Britain ends. None have either controlling partners or PSCs in the UK, the most popular origin for partners being the Seychelles, followed by Belize, with both countries accounting for 42% of the general partners involved.
Another 26% of controlling partners are based in Eastern Europe. Many PSCs of the partnerships involved are largely based in Russia. Only a handful are inside the European Union.
Registration documents for one of the 45 LPs. Credit: Bellingcat
British LPs have been used many times in illegal activities worldwide. Bellingcat and other investigative outlets reported previously giant money-laundering operations that moved, for example, around 80 billion dollars out of Russia to the West and offshore jurisdictions (Russian Laundromat). They were also involved in Moldovan and Azerbaijani schemes to steal tax-payers money.
Bellingcat reached out the UK Department of Business for comment, and the latter said:
“We have introduced the largest and most severe economic sanctions ever imposed on a major economy, significantly reducing UK goods being exported to Russia. Whilst we cannot comment on individual cases, we are clear that any UK company that is found to be selling or exporting sanctioned goods to Russia, directly or indirectly, could be in breach of sanctions law and could face a heavy fine or imprisonment.”
A new legislation, called the Economic Crime and Corporate Transparency Bill, received Royal Assent on 26 October 2023, introducing regulations to LPs such as the need for partners to provide additional identifying information.
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