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December 5, 2019

Exclusive: UK company accused of facilitating fraudsters operated from Karachi

Top Story

December 5, 2019

ISLAMABAD: A family-owned company in London at the heart of controversy for having fraudsters, organised crime and Italian mafia among its clients was operating from a building situated in the Information Technology Park of Karachi, leaked documents have revealed. The News, reporting partner in this investigation collaborated by journalists from different countries, has confirmed from its Karachi staff in addition to discovering companies it registered in Pakistan for this business.

Formation House is a company formation enterprise in London owned by Nadeem Khan, a Pakistani-British citizen who died in 2015 shortly before standing a trial in a money laundering case. It offers a range of services for creating and operating corporate entities in a number of countries including offshore secrecy jurisdictions such like British VirginIslands (BVI), Seychelles, Panama and others. Taking its website as a guide, Formation House has created over 400,000 companies, partnerships and trusts and sold 25,000 ready-made companies and partnerships.

A number of businesses, banks and tax havens used by international crime gangs were created by Formation House, documents show, and that it has repeatedly failed in doing proper due diligence on clients as companies would be set up after examining the basic identity record. Incidentally only one noted Pakistani client of Formation House was found from the leaked record who set up an offshore company in the name of his son and wife. Helicopters were purchased through this company named Golden Eagle Aviation Limited.

The leaked documents of 131 gigabytes were obtained by anti-secrecy information activist group Distributed Denial of Secrets and shared with numerous media outlets through The Organized Crime and Corruption Reporting Project (OCCRP) which partnered with 17 other media organisations including The News (Pakistan), The Times (UK), Finance Uncovered (UK), Suddeutsche Zeitung (Germany), South China Morning Post (Hong Kong), NBC TV (US), Economic Times (India), tro.si (Slovenia) and others. The project has been dubbed #29Leaks in reference with Formation House address: 29 Harley Street, London.

Formation House, itself an offshore company incorporated in BVI, is owned by Centre Limited which was registered with Security Exchange Commission of Pakistan in 2004. Nadeem Khan was the owner of Formation House whereas Centre Limited is registered in the name of his mother, Firdous Khan, and brother-in-law, Abid Raheem who through confirmed being its director he said it is no more operational. Discussion with staff in Karachi indicates the operation here was closed in 2017 as family feud after Nadeem’s death resulted in separation between his children and brothers. Currently, Charlotte Pawar, Nadeem’s step-daughter is chief executive. Darius Khan, his son, is also involved.

As many as eight companies connected with Formation House are registered with SECP, all of them private limited enterprises that don’t require annual filings with the regulator thus leaving everybody clueless about the nature of business. Centre Limited and Infini Logic, another company, were also registered with Pakistan Software Export Board for “IT export” much like the Karachi-based enterprise that was caught involved in selling fake degrees worldwide.

Although legitimate companies use the services of Formations House, many others use it to hide their shady deals and to avoid inspections from financial regulators. One of the incentives for clients was to have a postal address of London’s posh area: 29 Harley Street. Besides the offer of an upmarket address, Formations House offers a local phone number, a bank account, and preparation of annual accounts and company filings. For those seeking a business façade and a degree of anonymity, this is a one-stop-shop.

Sales, information technology and accounting operation of Formation House were being carried out from Karachi where at one point of time were more than 150 employees having occupied entire 14th floor of Caesers’ Tower situated in IT Park of Karachi. Since calls were routed to Karachi’s call center from London, local employees were given Western names. The head of sales department, for example, was Oliver Hartmann. This German sounding name was of Syed Rizwan Ahmed who was dealing with the clients throughout the world. Included among them were Iranian officials who wanted to register a company in Gambia to disguise identity in order to evade international sanctions. The daughter of an Italian mafia was also among them.

Charlotte Pawar, the step-daughter of Nadeem Khan is current chief executive of Formation House. She admitted to an undercover report from The Times (UK) that it was possible for company owners to conceal their identities and deposit funds at foreign banks.

The level of due diligence is also apparent from the fact that director of at least 40 UK companies (let alone the entities registered in other jurisdictions) that Formation House created have been disqualified after allegations of wrong doing. Charlotte’s grandmother was a director of companies and signed off accounts even though she was dead.

Responding to questions collectively sent by reporting partners of #29Leaks project, Charlotte said the database had been stolen from its server and used for “several report extortion attempts.” Like all other formation agents in our industry, she continues, we have no control over the actions of companies and their directors after we have provided our formation service. She however insisted that her business carries out due diligence practices required by Revenue & Customs and performed more due diligence and anti-money laundering check than were required by Companies House’s own online process. “As part of our MLR (Money-laundering regulations) registration we are required to carry out regular reviews of our compliance procedures. As a result, from time to time we have added new measures to our processes,” she noted.

Karachi operation would have remained a secret had Oliver (Rizwan) not shared during an email exchange with a client he trusted, named Michael. “I would like to share something with you in confidence. I am managing this offshore office of FORMATIONS HOUSE from Pakistan.(Karachi). We do have main office on Harley Street, where you were and met Charlotte (She is my boss) but I, myself is managing offshore office from Pakistan in which we have sales and support operations. I do not tell this to all the clients, only to those which I am confident, that they understand nowadays business needs for offshoring,” read his email dated April 27, 2015.

Talking to The News, Rizwan said there was nothing illegal. He did what his boss ordered. Due diligence of clients was not my responsibility, he explained. “It was done from UK office,” he said. While Formation House was doing a roaring business, staff in Karachi office was almost starving. Majority of them were hired at salary ranged between Rs25,000-75,000, their salaries were being delayed. At the time of operation’s closure in Karachi, salaries were pending at least for three months in each case. Rizwan who was dealing with billionaires intending to set up companies, said he had to pull out children out of school due to financial crisis. “I’m happy you people are doing this. It may help in recovering of our pending dues,” he said.