Rundown flat ‘at centre of billion-dollar fraud’

Politicians have called for an investigation into whether Scotland has become the money- laundering capital of Europe, following a report linking Scottish “shell” companies to a £634m ($1bn) fraud in the ex-Soviet republic of Moldova.

One company was registered at a rundown flat in the Pilton area of Edinburgh. Picture: Ian Georgeson

A leaked report compiled by international investigation agency Kroll identified 20 UK limited partnerships (LPs) – 19 of them based in Scotland – which it believes were involved in the fraud, which allegedly emptied three of Moldova’s leading banks of almost all their funds.

It claimed that one company was registered at a rundown flat in the Pilton area of Edinburgh, while Moldovan National Bank records accessed by Kroll show that the equivalent of $498m in loans was transferred to three Scottish limited partnerships.

A spokeswoman for Kroll refused to comment on the content of the report – prepared on behalf of the National Bank of Moldova in April and leaked by the speaker of the Moldovan parliament, Andrian Candu –but told The Scotsman that it had made links between Scottish limited partnerships and a number of fraud investigations in recent years.

The number of LPs in Scotland has more than doubled from just over 6,000 to nearly 15,000 since 2009 – more than the 13,192 registered in the rest of Britain. Unlike companies, LPs do not need to file publicly available annual returns or accounts.

The $1bn that vanished from the Moldovan banks represents an eighth of the former Soviet republic’s gross domestic product. Moldova is the poorest country in Europe with problems including a breakaway republic within its borders which aligns itself with Russia and a huge brain drain which has seen the majority of its young people leave for western Europe.

The leaked study claimed that the money was deposited in a Latvian bank and has since been acquired by another Scottish limited partnership, Fortuna United LP. The total sum owed to Fortuna United is $1bn – the same as the complete proceeds of the alleged Moldovan bank fraud. Fortuna shares its Pilton address with 420 other companies, including 258 other LPs. Another company, Tennant Shipping, based on South Bridge, Edinburgh, is also mentioned in the report.

Scottish Labour’s justice spokesman Hugh Henry said: The UK Government must consider whether the law covering limited partnerships needs to be tightened and whether it is being abused by criminals.

“Police Scotland and the Crown Office should investigate to determine whether there is industrial-scale money-laundering going on.

He added: “Not only could this embarrass Scotland and diminish our reputation for financial probity but if we have poor countries being ripped off and we become a conduit for the money then it would be morally and ethically indefensible.”

A spokeswoman for Kroll said: “We cannot comment on the detail of investigations undertaken for its clients, which are invariably strictly confidential. As such we are unable to comment on the content of the report prepared by Kroll for the National Bank of Moldova.”