NZ shell companies in Kyrgyz corruption

New Zealand companies with a vacant driveway in Auckland's Albany as a registered address have been key players in a US$1.2 billion (NZ$1.5b) money laundering scandal in central Asia that helped bring down a government and sparked deadly riots.

A report by London based non-profit NGO Global Witness offers more embarrassing revelations over company formations that in May saw New Zealand struck off a prestigious European Union banking "white list" because of weak money laundering and terrorism financing rules.

The report also outed several recurring director/shareholder names on the New Zealand's Companies Office register that are likely to be low-paid fronts for unknown people who control the shell companies.

Global Witness' 90-page report 'Grave Secrecy' shows how New Zealand, British and Bulgarian companies moved billions of dollars in suspicious transactions at AsiaUniversalBank (AUB), Kyrgyzstan's largest bank.

AUB was nationalised and found by the authorities to be insolvent after a revolution overthrew the regime of President Kurmanbek Bakiyev in April 2010.

Bakiyev and his son Maxim Bakiyev fled the country as nearly 100 people died in the revolt.

The new Kyrgyz authorities nationalised AUB and said it discovered it was engaged in large-scale money laundering. An independent audit by the European Bank for Reconstruction and Development supported the claims.

Global Witness obtained AUB documentation from the international SWIFT inter-bank system to find out where the money had gone, including US$240 million in the Bakiyev's last week in power.

It discovered New Zealand shell companies with no apparent business activities moving millions through AUB.

Global Witness said the shell companies "may have facilitated an extensive money laundering scheme at AUB that took advantage of its correspondent banking relationships to transfer money out of Kyrgyzstan to banks all over the world".

It then searched for the companies listed in SWIFT documents to find out where they were incorporated and what business they were involved in.

Most of the companies were incorporated in New Zealand, the UK or Belize after Bakiyev's rise to power in March 2005.

"Most importantly, many of them are linked to each other via the company service providers that registered them," Global Witness said.

Three of the companies had no real business in Kyrgyzstan but moved US$1.2b through their AUB accounts in less than two years.

Global Witness point to Lenymar Ltd, a company incorporated in New Zealand in November 2007 and struck off last September.

When formed, its registered address was what appears to be an unused driveway in Albany, Auckland. Its address for service was in Latvia and its director was Izeth Tapia of Panama. She was director of 630 registered New Zealand companies, most now struck off.

Global Witness reached Tapia and she denied any connection to the Bakiyev family.

Asked who the actual owners of the companies she directed were, the report quoted her saying: "I live with my little baby in a small town in the interior of the country and I have no job, no work for anyone, I've only been a nominal head these corporations and I have nothing more to say about this topic."

Lenymar's last registered address was 69 Ridge Road, Albany, also the registered address of Company Net Ltd.

Global Witness said Lenymar made over 1,300 transactions in just over a year, the majority of them suspicious transactions with other shell companies.

Other New Zealand companies found in AUB were Craftur Viss Ltd, Jorgentur, Merbayer and Co Ltd, Volnegar Ltd and Piar Active Ltd - all with Ridge Road as an address, with Tapia as sole director and all now struck off.

The companies, and those in UK, Belize and Bulgaria, had no obvious links but in what Global Witness called an "extraordinary situation" they could not find any evidence any of them were engaged in any meaningful 'real' business.

In 14 months, Volnegar's AUB account received US$115m from another shell company.

Lenymar Ltd moved US$224m through its account.

Glenn Smith, the director of The Company Net, has not returned calls to Fairfax or Global Witness about AUB.

In May, when Latvia revealed the role of New Zealand companies in corruption, leading to the striking from the EU white list, Mr Smith said he had not dealt with offshore clients for over a year.

"We ceased offering services to any offshore client once we became aware of the potential uses of the companies they were forming, and we continue to offer assistance to the NZ authorities in their efforts to tighten up the legislative loopholes," Smith said then.

Global Witness said nobody who seriously intends to launder money attempts to do so by opening accounts in their own name these days.

"The UK, New Zealand, and the wider international community, need to address the fact that 'onshore' nations have become just as much a part of the 'offshore' problem as sunny Caribbean islands and are therefore a critical link in the 'supply chain' for corruption."

Fairfax Media