New Zealand, Fresh From Its Service to Mexican Drug Lords, Helps Out the Russian Mafia

New Zealand’s in the doghouse again, about organized crime, and may not re-emerge for a while.

I wrote about the Mexican drug lords’ enormous New Zealand connection here. It’s a long post about a meaty $400Bn, yes that’s Billion, of moneylaundering, via  front companies set up from New Zealand.

Now there is a new reputational disaster. According to New Zealand’s internet newspaper, Stuff, the Russian mafia also had its way with New Zealand’s magnificently lax, yet painfully transparent, company incorporation regime:

Another New Zealand shell company has been linked to an alleged fraud worth more than US$150m – this time involving Ukrainian state-owned companies.

The company, Falcona Systems Ltd of Albany, Auckland, was struck off the New Zealand Company Register last October but only after it was used to gain $150m in kickbacks for Ukrainian and Latvian officials, according to East European media reports.

The latest allegations involving New Zealand shell companies comes five days after Fairfax Media was told by the Latvia Finance Ministry that New Zealand had been struck off a European Union banking and corporate ”white list” over our weak money laundering and terrorism financing controls.

Yes indeed, there goes New Zealand’s spotless reputation. Well we told ya that would happen, same NC post as above, final paras; we just picked out the wrong angry Eastern European minister.

One imagines that this hit to New Zealand’s reputation could at last spell the end for John Key’s pitifully idiotic plan to turn New Zealand into an offshore financial “hub”, too, but then, that inane pet project has survived all sorts of heavy contact with reality already.

Back to Stuff:

Latvian authorities said they moved after revelations Tormex Ltd, of Queen Street, Auckland, allegedly washed US$680m through a Riga bank account – no explanation of where the money came from or went. However, a multi-national investigation points to the Russian Mafia.

Two years ago another New Zealand shell company, SP Trading Ltd of the same Queen Street address, was found to have chartered a Georgian registered plane to fly embargo-busting arms from North Korea to an unknown Middle Eastern state. They were intercepted in Bangkok.

Falcona Systems has its registered office at 23/17 Georgia Terrace, Albany, Auckland. Fairfax investigations found an unoccupied townhouse.

Pleasingly, the mystery of 23/17 Georgia Terrace, Albany, which I can solve, offers an opportunity to trump Stuff’s investigation and suggest another line of enquiry.

In fact 23/17 Georgia Terrace is one of the old addresses of the dirt cheap company registration service Company Net Limited, which has the web site ExpressBiz. That explains why so many overseas companies have their registered offices in Georgia Terrace…and gives quite a hint about who is registering them. A dive into the splendidly-built but horribly contaminated NZ company register tells us that this unassuming location has been the registered address of 765 companies, of which 35, not all of them obviously dubious, survive. So there’s a spot of mole-whacking still to do there.  Company Net Limited has had a couple of other addresses, so they will be worth checking out too. More on that later in the post.

Back to the Stuff article and Falcona Systems:

Its solitary director is Inta Bilder of Latvia. A search of the Company Register shows 942 results for Bilder as director and shareholder.

OK that is a giant hit. Go Stuff!

Stuff digs onward and finds another interesting office address:

Falcona Systems main shareholder is Interhold Ltd, of Level 4, 44 Khyber Pass, Grafton, Auckland…

This location seems to have a profusion of alternative versions in the register; for instance:

Level 4 Outsource It Tower, Grafton, Auckland 1150, New Zealand
Level 4 Newcall Tower, 44 Khyber Pass, Grafton, Auckland , New Zealand
Level 4, 44 Khyber Pass, Grafton, Auckland

Simply searching the register for “44 Khyber Pass” gives 1036 active companies. Evidently this too is a popular address for company registrations, so perhaps that is an overcount. Narrowing the search to the known-to-be-dodgy “Level 4 Khyber Pass” still gives 594 results though. Yikes!

Back to Stuff, who were talking about Interhold Limited:

…It, in turn, is owned by Genhold Ltd, of the same address, with a Panama-resident director.

Oh, here we go, Panama again. Genhold Limited’s director is Fernando Enrique Montero de Gracia, Calle Primera, Panama Viejo, House 496, Panama City, Republic Of Panama. De Gracia is also a director of Pacific Metal Recycling and Trading Ltd, which is wholly owned by Maxhold Limited, whose director is Manti Effrosyni, of Cyprus. Now, if the Russian Mafia is behind this, it’s only right that there would be a Cyprus connection somewhere:

Typically, Russian investors create “brass-plate” companies to take advantage of Cyprus’s low 10% corporate tax rate. Many of these funds are reinvested back in Russia – ¤1.4bn [sic] in 2008 – avoiding Russian tax. The Cypriot authorities angrily deny that the island is a haven for money laundering. They also point out that Russians invest more cash in Austria and the UK.

But many analysts are sceptical: “We are talking about Russian money laundered through Cyprus. The Russian mafia uses Cyprus extensively,” said Hubert Faustmann, associate professor of European studies at Nicosia University. “This is why Russia has no interest in Cyprus going down economically.”

Tax havens and organized crime go together like dung and flies. Well, we knew that.

Anyway, via the Cyprus connection, another modest opportunity to trump Stuff’s piece turns up: Manti Effrosyni is in fact the director of 88 other New Zealand companies. Meanwhile another Cyprus resident, Petr Zika, directs Brithold, which is owned by the same Genhold Limited mentioned by Stuff. Zika directs another 124 New Zealand companies. The network is getting bigger!

Back to Stuff:

Genhold is in turn 100 per cent-owned by Trust (NZ) Holdings Ltd of the same address. Its sole director and shareholder refused to comment on the company’s ownership.

The name of the director is Liliya Soboleva. In fact our Liliya was a director of a total of 16 New Zealand companies at one time or another. Via another of her companies, Club Property Limited, we find the registered address of C/-y T Choi Lawyers, Level 8, Phillips Fox Tower, 205 Queen Street, Auckland, New Zealand. I suppose that, pending clarification, those lawyers have a little red flag waving over them too.

Looking at more companies of which Inta Bilder used to be a director finds us a further sprinkling of names and companies to be wary of:

Via Metalwest Limited , we find another Russian name, Borysova Tatyana (vice versa, I suspect: who registered that name? Not Borysova herself).

Via Equity Law Barristers, we find Evgeny Orlov, current director. He is a director of 7 New Zealand companies.

Via Third Capital Limited, we find John Benjamin Foster Aosta of Panama, current director. He is a director of 4 New Zealand companies

Via NZ Evolution Trade Limited, Olga Belchikova, a current director of just that one New Zealand company.

Via GBFX Limited, we find Riccardo Luigi Alberico GAGLIARDI, 5827 Prairie Cr, On L5n 6b4, Mississauga , Canada, current director.

Via One World FX Limited, Eng Neng Chaw, 13a-06 Taragon Puteri Bintang No 136, Changkat Thambi Dollah, Kuala Lumpur, 55100 , Malaysia, current director.

A mixed bag. Goodness knows why Mississauga, Canada, is such a magnet for expats running dodgy New Zealand companies. is that another Russian mafia connection? There was something like that in Ontario, way back, ten years ago, but I though it was all cleaned up. Perhaps our Canadian readers can help.

More Stuff, now looking into other names connected with Bilder:

Dzerkalo Tyzhnia newspaper names an Erick Vanagels as being involved with both Highway and Falcona.

A search for Vanagel’s name in the Company Register produces 318 results with both Panama and Latvia addresses.

We can find still more related addresses and names via Macronet Impex Limited, of which Inta Bilder also used to be a director. It has company address 69 Ridge Road, Albany, Auckland , which delivers an impressively enormous 1766 results when you look for it in the register. This is another historic address of the company registration service Company Net Limited. Every single one of those 1766 companies is now struck off. One knows that startups fail, but that is still a remarkable rate of attrition. Some have been struck off by the NZ authorities, others, having served their purpose, whatever that was, by the company officers. A really good guess at how many of them were just fronts for crime requires a volume of investigation that is well beyond the scope of this post, sadly. A quick sampling turned up some regular-looking companies, along with plenty of Russian names and Cyprus residents, and plenty of appearances of Erick Vanagels, so one can’t simply pronounce the whole lot to be shady.

Note well: being struck off doesn’t necessarily mean it’s all over with those companies. When you strike off a company in the UK, its local bank account is frozen, after an interval for closedown activities be to completed. I imagine it is the same in New Zealand, though Companies House isn’t explicit on this point: perhaps a local can confirm that in the comments. What happens in NZ when the directors are overseas, and the bank account is overseas too, isn’t clear at all. It may be that New Zealand’s latest gift to the world is a huge number of (very) superficially legitimate-looking company bank accounts, in all sort of domiciles, attached to defunct NZ companies of dubious origin. A money launderer’s paradise; I hope it is not so.

Let’s recap the main points. Assume we agree with the premise of the Stuff story (Russian mafia). Assume also, reasonably, that if one connected company is dodgy, it means all of them are at least worth a quick look. On that basis, we have a whole bunch of active companies worth a quick look, as follows:

35 active New Zealand companies, some with possible Russian Mafia links, at 17 Georgia Terrace, Albany.

594 active New Zealand companies, many with possible Russian Mafia links (run inter alia, by Vanagels, Bilder and miscellaneous residents of Cyprus), at Level 4, 44 Khyber Pass Road.

…and…

another 730 defunct New Zealand companies at 17 Georgia Terrace, Albany, many with possible Russian Mafia links, that may still, in the worst case, have active overseas bank accounts.

1766 defunct New Zealand companies at 69, Ridge Road, Albany, many with possible Russian Mafia links, that may still, in the worst case, have active overseas bank accounts.

That’s 3,000 companies that are worth some level of closer scrutiny: or at least, the (large) subset of that 3,000 that has overseas directors.

These counts and assumptions may exaggerate the scale of the problem, but not necessarily by much. And if I’ve missed any other big clusters, which is perfectly possible, the problem is bigger. For instance a thorough trawl of New Zealand company directors with addresses in Cyprus, Latvia, Panama, the US and Canada might throw up some interesting patterns. One can’t do that kind of investigation via the register’s public interface, but a sleuth with SQL-level query access and a bit of gumption could serve up some pretty neat (and alarming) reports, I should think.

By way of taster, among the companies at those three hot spot addresses in Albany we can quickly identify (in addition to Stuff’s red flags):

People running 28 active or defunct New Zealand companies (Liliya Soboleva, Evgeny Orlov,  John Acosta, Olga Belchikova) who are indirectly connected with alleged moneylaunderers.

88 active New Zealand companies with possible Russian Mafia links, all run by one guy in Cyprus.

124 active New Zealand companies with possible Russian Mafia links, all run by another guy in Cyprus.

One is not necessarily impressed by the vigilance of the New Zealand authorities. Once alerted to the Stuff article (many thanks to ChrisPacific and John G.), it took me half a bureaucrat’s working day to put this list together. It’s not that hard to get a first-cut idea of the size of the problem. One can look for patterns in the register (by way of starting point, looking for very large counts of companies registered at the same address, or very prolific company officers). With more comprehensive access to their database than I have, the NZ authorities can do this even more easily than I can. It might be time for them to make a start on that.

We are still supposed to entertain hopes that the NZ authorities will say, or do, something that will put a stop to this endless whack-a-mole. Obviously one solution, in the new Companies and Limited Partnerships Amendment Bill, which will require companies to have a resident agent, won’t achieve anything at all, if the directorships held by Greg Roderick Stewart, New Zealand resident, are any guide. But extra (I hope, draconian) powers to investigate, warn about and deregister dubious overseas companies (another proposal that is in the Bill), will help a lot, if only to make sure that the moles actually do get whacked.

And perhaps there ought to be something in the bill that would impose more than a duty of care on people who register companies for a living. That would enable someone in authority in New Zealand to have a much more persuasive official word with the likes of the terrifyingly industrious Glenn Smith (no relation, as far as I know). He is the owner of bucket shop registration outfit Company Net Limited, formerly of 17 Georgia Terrace, Albany, later of 69, Ridge Road, Albany, and, for the last two or three weeks, of Unit O, 241 Rosedale Road, Albany (evidently he’s making enough out of it now to abandon working from home). As we have seen lot of the companies he has been registering at those addresses for overseas customers, at NZD320 a pop, via Company Net Limited, are dead dodgy. I wonder if he might remember registering a whole load more companies that had offices at 44 Khyber Pass Road, too.

This type of hectic registration activity will be familiar to folk familiar with the GT Group/drug lord story that I linked to at the top of the piece.

So is Glenn Smith another Geoffrey Taylor, unscrupulous mass registerer of dodgy companies? Or just another cowboy with an internet connection? I warned about a slghtly different type of hired hand, running offshore banks in New Zealand, here:

But the worst of this nonchalance about New Zealand’s registers and financial regulation is the potential it offers for New Zealand to be transformed into a full-on tax-dodging and money-laundering centre.  Then it won’t be Elvis impersonators or invisible Panamanians that one worries about, it will be the Mob.

What, exactly, is John Key’s aspiration for New Zealand, again? Does he want it to be a Financial Hub, or Panama, or is it to be Sicily?

With the Russian mafia having had such a field day in New Zealand, that’s an even better question than it looked at the time.

Further reading:
You can read much, much more about Tormex, just one of the (so far) ~3000 related NZ companies that someone in authority might want to take a little look at, if they can be bothered, and get a budget, here.
Some words from the New Zealand Justice Ministry here.
Here’s the new Companies and Limited Partnerships Amendment Bill again.