16/02/18

Ukrainian mercenaries are using Scottish ‘tax haven’ firm as front

Mercenaries from the former Soviet Union are using an Edinburgh shell firm as a front, The Herald can reveal.

Unidentified individuals who appear to be based in Ukraine have set up a Scottish limited partnership or SLP to hire armed guards for merchant ships in the world’s most dangerous waters.

The firm, Sea Force Group, late last year advertised in Russian for former soldiers and police officers willing to take to the high seas to fight pirates for just £650 a month.

Its owners have failed to comply with anti-money laundering rules under which they had until August to identify themselves or face daily fines of up to £500.

However, Sea Force Group has been trading since August, placing online recruitment ads in Ukraine as recently as October 2017.

The Herald wrote to Sea Force Group – its supposed “head office” is a mail drop in Edinburgh with no telephone number – to ask why it had not complied with rules under which it has to name a “person of significant control” or PSC if it has one. We received no reply.

Ukraine has become a major centre providing private military services, especially in the third world. The country also has an ongoing conflict in its own east where its government forces are fighting Russian-backed separatists.

Back in 2016 The Herald reported that another Edinburgh SLP, Childwall Systems, was providing armed guards for a steel mill close to that conflict zone. It did so despite being officially dissolved.

Sea Force Group LP was set up in 2016. Its website, registered in Ukraine in that same year, says the business has been trading since 2011.

The site claims Sea Force Group is a maritime security company based in the UK with ‘hubs’ in the Middle East and Africa. It says it hires former “Navy Seals” and other special forces and has carried out hundreds of missions. In broken English, it adds:”Our skilled security teams have effectively conducted marching vessels without incidents and no damage whatsoever to ship or crew.”

The social media site LinkedIn names a man with a Ukrainian name as Sea Force Group’s chief executive.

There was a boom in the use of mercenaries in the seas off east Africa after the outbreak of piracy following the civil war in Somalia.

Industry experts contacted by The Herald suggested demand for armed guards for commercial shipping was now falling as pirate attacks become rarer.

Sea Force Group in Russian-language recruitment adverts said it was looking for men aged 25-45 to be armed guards in “high-risk areas”. Applicants, it said, needed at least three years’ experience in the military and law enforcement.

Sea Force Group is just one of thousands of SLPs that have shrugged off the UK Government’s PSC regime. Campaigners have dubbed SLPs “Britain’s home-grown secrecy vehicle” after their opaque ownership structures were abused by mass money-launderers, tax avoiders, arms dealers and child abuse websites.

The UK Government has said it will announce further reforms of SLPs “soon” amid widespread concern the PSC regime is not working.

Labour MSP Jackie Baillie wants them to move faster. She said: “Not only do we have companies using Scotland to avoid paying tax, but it appears some of these firms are involved in military sub-contracting, deploying mercenaries to conflict zones.

“There have been numerous warnings about SLPs. The UK Government must immediately take action on SLPs and close these tax loopholes to ensure no one is using Scotland to avoid paying tax or hiding murky enterprises.”