Widespread shady practices suspected in cross-border cargo traffic
Billions of euros worth of cargo cross the Finnish-Russian border each year, and Finnish customs authorities say that much of it is owned by shell companies.
Not all of shell companies are involved in illegal practices, but they do make it easier to avoid taxes and customs duties in Russia. The companies, which are domiciled in different parts of the world, are often set up to hide the real owners of the goods.
“We have observed that there are plenty of cases in which the purpose of setting up a company in a tax haven is primarily to hide away those who are really involved in the transactions”, says Sami Rakshit.
Companies named on the bills of freight have impressive-sounding names. They are based in tax havens like the British Virgin Islands or Jersey, but they can also have an office hotel in London as their address.
Although the official location is on the other side of the world, the activity itself is directed from nearby. When 2,670 mobile telephones were confiscated from a company in Kotka in connection with a criminal investigation, a company in Belize claimed ownershp.
Showing up in Kotka District Court to demand the return of the phones were two Russian businessmen, who said that the company has a bank account in Switzerland, a CEO in Cyprus or Dubai, and its books in Hungary.
The court noted that the company’s bank statement is “curiously short, considering the extent of its business activities and the number of its personnel”. Nevertheless, the court ordered that the phones be returned to the company.
Customs authorities say that goods are sold from one shell company to another in order to hide the real parties of the transactions. Money goes to different parts of the world, and the goods themselves move from one warehouse to another. If something goes wrong, it could prove difficult to track down the holder of the post-office box in Belize.
“Everything can be cleared up, but it takes an incredible amount of time”, Rakshit says.
Shell companies are common in transit traffic, where the goods just pass through Finland while en route to Russia.
“In practice, all companies linked with transit transport are of this type”, says Olli Alho, head of criminal investigations of the eastern district of the Finnish Customs Service.
The combined value of the goods involved was over EUR 14 million last year.
The Audit Committee of the Finnish Parliament published a report earlier this year, estimating that about a fifth of goods transit through Finland and exports to Russia involves the “grey economy” in some way. This would mean that the Russian state would lose between 0,6 billion euros.
Shady practices in transport between Finland and Russia has been common knowledge for years, but little has been done about it.
Last year, the Virke project pointed out that a situation is emerging in Finland in which people can make preparations for criminal activity in another country with impunity.
Janne Marttinen, the head of the Virke project, says that double billing in trade with Russia could open doors to corruption and other negative practices in Finnish companies as well.
“Bookkeeping can prove unreliable, and it may be that there are financial arrangements involved, which suggest money laundering.”
Previously in HS International Edition:
Organised crime has major role in goods exports to Russia (1.11.2007)
Widespread acceptance of bribery among Russian border authorities (20.10.2009)