Saturday, October 31, 2020

UK Regulator scrutinises charities in £10m money laundering scam

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The Charity Commission has revealed it is undertaking a class statutory inquiry into London-based charities alleged to be involved in a scheme to launder £10m from the sale of counterfeit erectile dysfunction and slimming pills.

The charities had a number of trustees in common.

The regulator has been investigating the eight charities, all based in North London, since June 2014 when it was notified of a Metropolitan Police investigation into concerns that they were being used for money laundering.

The Commission assessed information and found a pattern of regulatory concerns across the charities, which included signs of fraud and mismanagement.

It opened a class statutory inquiry into Chabad UK, Havenpoint Worldwide Ltd, Mamosh Worldwide Ltd, Or Simcha, Ozer Dalim Ltd, Pikuach Nefesh Ltd, Worldwide Hatzala Ltd and Havenpoint Ltd.

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It has been unable to announce the investigation until now so as to avoid prejudicing criminal proceedings.

Edward Cohen, the administrator of Chabad UK and the person who operated the financial accounts, has now been convicted of laundering money through the charities, as well as for supplying false information to the Commission.

He was sentenced at Southwark Crown Court to a total of seven-and-a-half years for money laundering and theft offences, and two years and three months’ imprisonment for the benefit fraud.

The sentences are to run consecutively, to bring the total jail sentence to nine years and nine months’ imprisonment.

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The London Regional Asset Recovery Team (London RART), part of the Met’s Specialist Crime Command, launched an investigation in March 2013 after receiving information about the sale and purchase of counterfeit, unlicensed medication from a number of online internet pharmacies.

A large number of websites offering erectile dysfunction medication and slimming aids – primarily aimed at customers in Austria, Germany, Switzerland and France – were identified.

Further enquiries established that a group of UK companies based in Stamford Hill linked to the Chabad UK charity was receiving card payments for these products via a number of merchant accounts.

Analysing accounts linked to Chabad UK, investigators found that from March 2012, the number of transactions dramatically increased and the majority were payments from overseas accounts.

The number of ‘chargebacks’ on these merchant accounts – when the customer requests a refund of the card payment, often due to goods being faulty or not received – linked to the sale of the medication also saw a large rise from this period.

From March 2012, 14 bank accounts which received payments from the merchant accounts were opened in the names of charities and companies associated with Chabad UK.

Between March 2012 and September 2014, nine companies of the Chabad UK group – seven of which were registered charities – processed over £10.3m, with police investigators saying only a very small proportion was confirmed as legitimate charitable donations.

During the same period, £8,601,299 was transferred to foreign exchange accounts, and £1,676,011 was transferred to a number of money service bureaus, as well as thousands of pounds transferred to personal accounts.

Detective Sergeant John Nagle from the North West Command Unit, who led the investigation, said: ‘Edward Cohen set up a pan-European operation selling dangerous counterfeit medication to thousands of unsuspecting people, pocketing millions of pounds in the process.

‘In an effort to conceal the profits from Edward’s business venture and with full knowledge that what he was doing was illegal, the money was funnelled through bank accounts set up by a legitimate charity that he ran.

‘Edward Cohen also transferred large sums from donations made to the charity in good faith into his own bank accounts, which paid for rent and other personal expenses.’

Amy Spiller, head of the investigations team at the Charity Commission, said: ‘This case has involved a dishonest abuse of charity, and we welcome the sentence. Charities exist to do good and strengthen society, so abuse of position of this kind has no place in charity. It is right that the individual has been held to account for his actions through the conviction.’

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The Commission’s investigation has included examining the use of the charities for a non-charitable purpose and as a conduit to launder the proceeds of crime; the misapplication of charitable funds for an improper or criminal purpose and personal benefit to trustees in breach of trust.

It has also looked at how the charities were set up and the supply of false or misleading information to the Commission.

The Commission will now progress the final stages of its inquiry and said it will report on its findings and conclusions in due course.

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