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World Bank blacklists anonymous UK firm acting ‘fraudulently’ in Uzbekistan

An investigation found Scotland-based NovoLine Resources LP used fake documents to win contracts to supply medical equipment to Uzbekistan

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David Leask
29 March 2021, 12.00am
Edinburgh
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CC BY 2.0 Gary Camphell-Hall / Flickr. Some rights reserved

The World Bank has blacklisted an anonymously owned UK shell firm after exposing “fraudulent practices” in an emergency medical aid programme.

In the latest blow to the reputation of British corporate governance, the lender has banned Edinburgh-registered NovoLine Resources LP from bidding in its procurement processes for three and a half years.

The move came after an investigation into contracts the firm won to supply vital equipment to Uzbekistan’s health ministry.

Officials at the World Bank, which was funding the purchases, found that NovoLine Resources had submitted fake documents, including false financial statements and a false past sales contract to supply similar kit.

“It is shocking but perhaps unsurprising to see yet more reports of Limited Partnerships registered in the UK being used for illicit purposes abroad,” said Glasgow Central MP Alison Thewliss, the SNP’s shadow chancellor, when asked about NovoLine Resources.

“By continuing to turn a blind eye, the UK government is essentially complicit in facilitating this type of activity,” Thewliss added. “It has to get a grip on this problem and fast, if it cares at all about the UK’s reputation as an honest place to do business.”

The ban on NovoLine Resources – formalised at the end of 2020 – came two years after another global agency, the United Nations Development Programme (UNDP) disbarred four Scottish shell firms for “fraud” or “fraud and collision” in Uzbekistan aid schemes.

Like NovoLine Resources, the four the businesses blacklisted by the UNDP were Scottish limited partnerships or SLPs.

These once-rare partnerships have been dubbed “Britain's home-grown secrecy vehicles” by anti-corruption campaign group Transparency International.

There has long been concern about the use of SLPs and other British and international shell firms, especially limited liability partnerships, in Uzbekistan.

Experts believe such businesses – which can be bought online for as little as a thousand euros – are used as a way of hiding beneficial ownership that is more likely to lie ultimately in Tashkent, the capital of Uzbekistan, than in Edinburgh or London.

"UK shell firms are used to conceal the identity of politically exposed persons, launder money, facilitate bribe payments, and more"

“UK legal entities are a key feature of the corruption landscape in Uzbekistan,” said Kristian Lasslett, professor of Criminology at Ulster University in Northern Ireland. “They are used to conceal the identity of politically exposed persons, launder money, facilitate bribe payments, organise frauds, and access the global financial system.

“Because the volume of abuse is so great, compared to the resources made available to UK regulators, the chances of ever being nicked is near enough to nil.”

Lasslett, as director of UzInvestigations, has highlighted the role opaque Scottish and English partnerships play in the Uzbek economy for openDemocracy.

“Medical procurement is an area understood to be controlled by a number of politically exposed families in Uzbekistan,” he added. “So it is not surprising to see an anonymous Scottish LP being awarded big ticket items”.

In an official communique in November 2020, senior World Bank officials ruled that Novoline Resources had “engaged in fraudulent practices by submitting a set of false financial statements and a false past equipment sales contract in its bid for an anesthesia and respiratory equipment supply contract in an attempt to mislead the relevant procurement authority”.

Public tender notices show that NovoLine Resources secured $240,000 in orders from Uzbekistan’s health ministry in December 2018.

Most of this sum was to supply “anaesthetic equipment and equipment for intensive care units” – a contract it won by beating offers from companies in Russia, America, Germany and Japan on price.

"The UK’s regulatory regime has severe deficiencies; there is no proper enforcement around firms declaring a person of significant control"

Other public tender documents show it also sold unspecified equipment destined for Uzbekistan’s southern Surkhandarya region, through a state body, for more than $300,000.

NovoLine Resources did not defend itself to the World Bank. Officials at the global financial institution said they had taken “into account, as an aggravating factor, NovoLine’s repeated pattern of misconduct, noting that NovoLine submitted multiple fraudulent documents”. They also pointed out that the SLP had already served a temporary six-month ban.

There is no way of knowing who actually owns NovoLine Resources, or who benefitted from profits from the World Bank-funded medical aid contracts.

The SLP is currently registered at a virtual office in the same Georgian granite building as an upmarket dog-grooming business in Edinburgh’s West End.

The UK government – not the Scottish one – is responsible for Scots’ corporate law. Back in 2017, the UK Conservative administration – after a series of scandals with Scottish shell firms – ordered that all SLPs name a person of significant control or PSC.

Many have never complied – or have done so in a way that does nothing to improve transparency.

“The UK’s regulatory regime has severe deficiencies,” said Thewliss. “There remains no proper enforcement around firms declaring a person of significant control (PSC), and Companies House continues to be significantly under-resourced.”

NovoLine Resources does name a person of significant control: another SLP created in July 2020 called NovoLine Resources Holding LP.

This new SLP has two general partners and two limited partners – all opaque offshore enterprises – and declares, perfectly legally, that it has no PSC.

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NovoLine Resources is older than its opaque corporate parent. It was originally set up in 2015 at a Glasgow mailbox address with signatures from one of the more prolific creators of off-the-shelf corporate bodies, International Overseas Services.

Filings at Britain’s corporate registry Companies House show that NovoLine Resources listed NovoLine Resources Holding as its PSC on 25 August 2020. That was the day after the World Bank formally notified the firm that it was facing potential sanctions.

“This is another depressing story around the overt and fairly blatant abuse of the UK corporate system,” financial crime investigator Graham Barrow said of Novoline Resources.

“Here we have an SLP which originally declared a PSC called Hookson Projects LP, which it shares with a further 19 SLPs and, which, on the day of being served notice of sanctions proceedings by the World Bank, it unceremoniously dumps it in favour of another newly created SLP.

“An action it took, presumably, to save Hookson Projects and the other 19 SLPs from being caught up in the sanction. Which can only make you wonder what they are all up to.”

There is no immediate way of identifying or contacting the owners or controllers of NovoLine Resources. The firm has no website and lists no phone number or email address.

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