The Bedford Street Arms Brokers
The deal that linked London’s West End to the carnage of South Sudan
№43 Bedford Street is a narrow, four-storey Victorian terrace in the heart of London’s West End, a stone’s throw from the cobbled streets of Covent Garden. Its ground floor is occupied by a small office — a branch of the mailbox rental company, Mail Boxes Etc. Company promotional literature boasts of providing clients with “a prestigious street address that can provide a polished image for your business”; additional services include virtual or physical mailboxes, mail forwarding and parcel handling. £48.00 per month buys you a Central London mailbox; add £5 and you can use this as your registered company address.
The whole exercise feels innocuous, if potentially a little shady. But 43 Bedford Street is the address used by S Profit Ltd — a UK company whose name appears in commercial documents related to the supply of armoured vehicles, weapons and aircraft to Egypt, Senegal, Mali, Rwanda, Ukraine and Peru — all without the legally required UK arms trading licences. More worryingly, S-Profit’s name also appears on a South Sudanese government document as the prospective “supplier” of 60,000 small arms and light weapons, 30,000 rocket-propelled grenades and five million rounds of small arms ammunition to the Ministry of Defence of South Sudan — a huge quantity of arms intended for one of the most dangerous destinations for weapons in the world.
Since December 2013, South Sudan has been torn apart by violence, as a particularly brutal civil war has engulfed the country. Nearly one in three South Sudanese — some 3.8 million people — have been driven from their homes. Thousands of people have been killed and entire towns and villages left in ruins. Systematic sexual violence — gang rapes carried out by armed soldiers at military checkpoints — have left many South Sudanese women and children with profound psychological scars, and in some instances permanent disabilities, such as bowel incontinence. And in February 2017 the United Nations declared Africa’s first famine in five years, in conflict-affected parts of South Sudan’s Greater Upper Nile region — in villages surrounded by potentially fertile and well-irrigated fields that the war has turned to wastelands.
This is a low-tech war, in a poor, relatively isolated country. South Sudan has no manufacturing base, tenuous infrastructure and few paved roads. Broken down military equipment litters the battle fields. Yet still more arms and ammunition pour in: all sides of the conflict have seen cross-border re-supplies of weapons since 2014 — particularly from Sudan and Uganda. “As we sit safely in this Council Chamber,” the UK Foreign Secretary, Boris Johnson, told at a UN Security Council briefing in March 2017, “villages in South Sudan are being raided and plundered and set ablaze.” He urged his fellow council members to impose a UN arms embargo “to protect ordinary South Sudanese from the worst excesses of military power”. But his words fell on deaf ears, as yet again the UN Security Council failed to turn rhetoric into concrete actions.
Under these circumstances, you would imagine that it would very difficult for a UK company to be involved in an arms contract to supply large quantities of arms for use in South Sudan. To do so, those controlling the company would have to be willing to run the legal risk of operating in breach of not just an EU arms embargo but UK domestic law, buttressed by forthright policy positions emanating from the very highest echelons of the UK government. You would also imagine that were the UK authorities to learn of any involvement by a UK company in a massive arms deal to South Sudan, the response would be swift and harsh: the company would be immediately wound up, the directors investigated and perhaps prosecuted.
But you would be wrong. In fact S-Profit has been operating in the UK for over 6 years, and despite recent revelations by Amnesty International about the company’s involvement in a £39 million deal to send small arms and light weapons to South Sudan, at the time of writing it remains in business. To find out how this could be so, one needs to look at how one goes about setting up a company in the UK, and how, once registered, UK companies are then regulated. What we found when investigating this case was a regulatory vacuum at the heart of one the world’s largest financial centres which allows unscrupulous individuals to run illegal enterprises out of central London relatively openly, without fear of legal sanction or prosecution.
The history of S-Profit
The story that links a quiet, affluent backstreet in central London to the ongoing turmoil in South Sudan began six years ago. In July 2011, Ian Taylor — a New Zealand company formation agent who has been involved for over a decade in setting up ‘shell companies’ on behalf of others in numerous jurisdictions — applied to register S-Profit Ltd in the UK as its sole shareholder. Taylor is a colourful figure, whose website describes himself as offering “‘tailor made’ [sic] corporate structures with no shortcuts taken” in 22 jurisdictions, including the UK, and whose name continually crops up in media exposés of baroque company structures. When we contacted Mr Taylor, asking about his knowledge of S-Profit, he replied, somewhat bafflingly, “I have no knowledge of S-Profit Ltd, other than I have at some point, been listed as a director of this company in the UK.”
Before S-Profit was registered, the Auckland-based company formation business that Mr Taylor ran with his father, GT Group, had had a chequered history. It had been named by US prosecutors, reported to the UK’s Serious Organised Crime Agency, and publicly named online by the Canadian governmental financial intelligence unit FINTRAC, as having set up companies used to launder money for North Korean arms deals and for the Mexican Sinaloa drug cartel. According to local media reports, the New Zealand government shut down the Taylors’ company formation business at the beginning of June 2011 (although on Ian Taylor’s website he makes the surprising claim that he is “directly credited with driving the New Zealand government to strengthen its previously weak and negligent company registration processes”).
The day after its registration, the shareholding of S-Profit was transferred from Ian Taylor to a Ukrainian national, Artem Zabora, a resident in Ukraine who lists his service address for official communications as the company’s registered office at “Office 11, 43 Bedford Street, London”. In fact, there is no “Office 11” at this address, but a rented mailbox numbered 11 at the mailbox rental company, used by over 100 companies as their registered address. Mr Zabora’s UK telephone number, listed on company documents, is registered to a commercial ‘virtual telephone switchboard’ service, and calls to the number go unanswered. A second director, resident in the Philippines, was added between 10 November 2014 and 25 January 2017. This individual has also been the director of over 100 other companies in the UK alone.
From these inauspicious beginnings, ‘S-Profit Ltd’ then started appearing on contract documents for the export of weapons across Africa, Latin America and the Middle East. In one document, S-Profit claimed to have imported three 6-metre-long truck mounted missile launchers — S-125 surface-to-air missile systems — into the UK, although when we put this to the UK Import Licensing Branch, no such import had been requested or authorised. Since even negotiations by UK companies for brokering weapons deals require prior authorisation from the UK’s export licensing authority in the case of certain weapon types and destinations, S-Profit’s business activities should have rung alarm bells for UK authorities even before it began negotiating a multi-million pound arms deal to South Sudan.
So how did a company whose first shareholder had previously been publicly named by financial crime authorities as setting up companies engaged in serious criminal activity, which had no directors resident in the UK, and no real business address but which was nevertheless claiming to export and import arms without UK licences, manage to evade detection? And why is it still in operation today? One answer lies at Companies House, the UK’s official registrar of companies.
How to set up a company in the UK
The process of setting up a company in the UK has been so ‘streamlined’ that all that is now required is £12 and an internet connection. There is no need for anything as rudimentary as a formal identity check or proof of address, such as a verified passport or utility bill; and no proof of the good standing of the people behind the company is necessary. Even if there was, the only checks Companies House will undertake relate to internal consistency of documentation. As long as your papers are correctly filed, it seems there is no obstacle to setting up in the UK, even if the underlying documents and declarations are false.
S-Profit’s company filings give no indication of its involvement in the arms trade, listing the nature of its business in registration documents as “non-specialised wholesale trade”. This was not evasive filing on the part of S-Profit: the company does not need to specify the nature of its business as an arms trader — indeed, there is not even an option for arms trading in the list of business activities that companies are required to use in their filings. Even if S-Profit’s activities were clearly flagged, with nearly 650,000 companies incorporated in the UK between 31 March 2016 and 31 March 2017 alone — more than one every minute — Companies House lacks both the statutory powers and the resources to check anything at all.
A Companies House staff member responsible for enforcement confirmed to an investigator working with Amnesty International that it was possible to set up a company with an entirely fake name and fake address; she insisted simply that Companies House did not have the powers or resources to check the authenticity of the names and addresses of company directors. This has led to some comically audacious fillings. In 2010, Camorra money launderers set up a UK shell company in Soho’s Broadwick Street, central London, under the name of “Ottavio Detto Il Ladro di Galline”, which in English means “Ottavio the chicken thief”. Under ‘Occupation’, he listed “Truffatore” or “Fraudster”, which was duly processed without comment by Companies House.
Could it be right that you need less verification of your identity, location and standing to set up a limited liability company in the UK than is generally required to hire a car or join a gym? And that once on the register checks on a Company’s business activities are minimal to non-existent?
When Amnesty International presented Companies House with information about S-Profit’s activities, the Acting Chief Executive of Companies House and Registrar of Companies, Ann Lewis, wrote that “the obligation to ensure the information is accurate lies with the company and its directors” and that Companies House’s policy of making company documents public was adequate to prevent “false, inaccurate or possibly fraudulent information”, since it allowed “civil society groups” to “highlight patterns, errors and erroneous information”.
In a nutshell: it’s the company directors themselves who are responsible for checking their own identities and the probity of their own businesses, while civil society must sift through millions of entries to root out bad practice. In the end, Companies House is itself a kind of a shell — a passive, virtually automated database, responsible only for uploading registrations and ensuring the various bureaucratic hoops have been jumped through. Oblivious to how its own systems are being abused, this vast unregulated archive soldiers on, blindly registering company after company. It’s through these gaping holes in the UK’s company registration system that companies like S-Profit have passed, linking the genteel-sounding Bedford Street to the military apparatus in Juba, the capital of war-ravaged South Sudan.
The South Sudan deal
Last year, Amnesty International gained access to a series of documents — commercial contracts and end user certificates — relating S-Profit to a huge prospective arms deal for South Sudan valued overall at US$169m. The deal included tens of thousands of machine guns, mortars, rocket propelled grenades and millions of rounds of ammunition. The timing could not have been worse: the sequence of contracts began in early 2014, as fighting, which had broken out at the end of 2013, was rapidly spreading across the country leaving a swath of suffering and destruction in its wake.
The paper trail seen by Amnesty International connected a web of entities in London, Kyiv, Abu Dhabi and Juba. Alongside S-Profit, the main players were the Ukrainian state-owned arms exporter Ukrinmash and a large private Emirati arms company, the International Golden Group. S-Profit appears on some, but not all, of the documentation. Crucially, an End User Certificate (a certification of the intended destination of the weapons) issued by the South Sudanese Ministry of Defence lists S-Profit as a “supplier” of approximately $US46 million worth of equipment from the overall contract; in a subsequent End User Certificate the UK company disappears. Yet in an October 2014 contract S-Profit reappears, as the purchaser of US$3.66m worth of rocket-propelled grenade launchers matching the types and quantities in the first certificate.
As ever with S-Profit, it was unclear why a company registered in the UK — whose involvement in these negotiations risked violating an EU arms embargo and UK criminal law — was necessary at all. It could have been access to EU, and by extension US banking facilities. Or because of the solid-sounding, law-abiding impression the London address would give off. Or was it, as one source close to the deal suggested to us, being used as a vehicle for corruption — a mechanism for skimming off Ukrainian public funds?
What was also unclear from our investigations was whether the contracts had in the end been fulfilled — if this equipment had actually been physically supplied to the South Sudanese army and was in use in the conflict. We asked the director of S-Profit, Mr Zabora this question directly, in a letter sent to the company’s central London address. Weeks later, the response arrived at our offices in an envelope covered in a patchwork of brightly-coloured Ukrainian stamps: Mr Zabora denied that the firm had supplied military products to South Sudan. We then sent Mr Zabora a follow up letter, presenting him with a copy of the End User Certificate and the contract documents listing S-Profit as a party to the deal. On the eve of publication, Mr Zabora again replied denying that S-Profit had supplied weapons to South Sudan, adding, somewhat ironically, “I would like to express my support to your efforts aimed at preventing uncontrolled proliferation of weapons in troubled regions of the world.”
In one sense Zabora was right. We now understand that the deal had apparently been fully negotiated — an act in itself potentially a criminal offence under UK law — but it appears that the weapons were never in fact sent. When, on 25 September, Amnesty International launched the report, From London to Juba: a UK-registered company’s role in one of the largest arms deals to South Sudan, detailing our investigation and publishing the incriminating documentation, there was major coverage in Ukraine, with a very public discussion about Ukraine’s role in sending arms to South Sudan in the media, and amongst politicians and arms trade officials. A spokesperson from Ukrinmash clarified that “the contract had been signed, but wasn’t executed” — the first official confirmation we had had authenticating the documents we had obtained.
Irrespective of this particular deal, we do know from its own official reporting that Ukraine has indeed supplied weapons to South Sudan for several years since the outbreak of the current conflict. Ukraine supplied 258 light and heavy machine guns to South Sudan during 2016; 892 machine guns during 2014; and in 2015 transferred five Mi-24V attack helicopters and associated technical support — injecting additional military capabilities which have led to a significant escalation of the fighting in South Sudan. 2017 figures have not yet been published. In midst of the media fallout, the Secretary of National Security and Defense Council, Oleksandr Turchinov, said regarding Amnesty’s report that state export companies had taken the decision to stop supplying arms to South Sudan until the situation there had stabilised.
But from the UK side there has been virtual silence. UK officials gave the BBC the blandest of responses: “We are aware of the allegations made by Amnesty and are currently investigating whether there have been any breaches of our export controls system.” In fact officials have been aware of these allegations since at least December 2016, when, while we were gathering evidence for the report, Amnesty International presented the documents we had obtained to UK customs enforcement officials. They conceded that “in the absence of a physical footprint in the UK” it was very difficult for them to take action. To our knowledge, S-Profit continues to trade to this day.
An isolated case?
The story of S-Profit Ltd is not an obscure instance — an exception to an otherwise airtight system of UK arms controls. The yawning loopholes that S-Profit used to set up a UK company, and then use it to negotiate arms deals, have and are being used by other entities to circumvent the UK’s arms otherwise generally stringent licencing procedures. Even the link to the Ukrainian arms industry is not unique to this case. This very issue has been discussed in the UK’s House of Commons Committee of Arms Control, resulting in reports and recommendations that have been largely ignored.
In Mid-2009, the UK’s Arms Control Committee travelled to Ukraine, ostensibly to discuss with their counterparts the huge Soviet stockpiles and growing arms manufacture in the country. The Chair of the Committee, Roger Berry, later told the BBC:
“In the course of our discussions he [Ukraine’s Deputy Foreign Minister] handed over a list of names of companies engaged in the arms trade, those that had been given licences to export by the Ukrainian authorities. On translation of this list, it transpired there were twelve UK registered companies and it looked as if they were exporting to some destinations that would have raised eyebrows in the UK. We casually stumbled across this list and this was completely unknown to our embassy in Kiev, so we were very surprised.”
The list included UK companies brokering arms to Sri Lanka (then in the midst of its civil war’s brutal endgame), Syria and Libya. Four of the companies were substance-less ‘shell’ companies, like S-Profit, without real UK presence, though as UK ‘legal persons’ these companies were operating in violation of UK arms control laws.
Despite the parliamentary committee passing this evidence to UK enforcement authorities, and publicising it in their subsequent report, there is no evidence that the UK government took any action against any of these companies. None of the companies on the Kyiv list were struck off (other than voluntarily when they were eventually dissolved some years later); none were prosecuted for violating UK trade controls. At least two, named for involvement in arms supplies to Syria and arms-embargoed Eritrea, continue to operate on the UK company register to the present day. Meanwhile the revelations continue, as do the destabilising effects around the world of the supplies of arms and military assistance facilitated by these UK-registered ‘brass plate’ arms dealers.
Last August, when Foreign Secretary Boris Johnson met General Haftar in Benghazi he urged him to respect the ceasefire and work for a peaceful and stable Libya. What he didn’t mention was the UK’s own role in the financing of mercenaries involved in the conflict. Last year UN investigators responsible for monitoring the UN arms embargo on Libya documented foreign mercenaries piloting and maintaining a Mirage F1 jet used in aerial attacks by ‘Libya Dawn’ militias in Misrata against rival forces allied to General Khalifa Haftar. The mercenaries were paid, the UN investigators found, by two anonymous corporate partnerships — both of which were registered in Edinburgh.
Rogue traders
The ‘Wild West’ of Companies House is one reason that the UK has become fertile ground for shell companies dealing arms. Another is that, unlike in other jurisdictions, the UK has no central register for arms brokering. Despite the potentially devastating consequences of the trade, it is easier to become an arms broker in the UK than a financial advisor or even a childminder. With no register, there are no professional bodies or standards and no reporting requirements of business activities. The regulation only comes at the point of licencing goods for export — a process companies like S-Profit will always avoid.
The UK government has argued that if such registration was a legal requirement subject to criminal or civil sanction, illicit arms brokers could simply decline to register. But this requirement would provide an immediately demonstrable offense for failing to register, and thus a simple legal basis on which companies could be wound up by court order under existing UK company and insolvency law. It would not only lighten the burden of proof for authorities, but also immediately raise red flags for other, legitimate contracting parties, which would be forced to ask why an unregistered UK arms broker was approaching them for business.
London prides itself on being a dynamic world city, whose success is built on a perception of respectability, adherence to the rule of law, fairness and honesty. But as our investigations found, this very reputation for probity is being subverted, and used by unscrupulous individuals for immoral and sometimes illegal ends. Because of lax regulations, London has become a prime destination for money laundering and the illicit arms trade. 43 Bedford Street is not the only London address on the letterheads of contract documents and end user certificates used for unauthorised arms deals that the UK licencing authorities would regard with horror.
It is time for the UK authorities to introduce stronger disclosures and verification of information about companies’ identities and activities, as well as those of their owners and directors. It is also high time for UK authorities to enforce the laws that already exist. None of the dozens of ‘brass plate’ UK arms dealers identified over the last decade has been prosecuted or wound up for their unauthorised arms dealing, though powers to do so exist in UK trade control and insolvency laws.
UK companies that violate UK laws, including arms embargoes and sanctions, must be wound up and face prosecution. Arms brokers must be registered, subject to professional standards and regular checks on probity. If things remain as they are, the likes of S-Profit of Bedford Street London, will continue to skirt the law, fuelling carnage on other continents, all from the comfort and supposed respectability of London’s West End.
· For a full analysis of the issues raised in this piece, see Amnesty International, From London to Juba: a UK-registered company’s role in one of the largest arms deals to South Sudan
