International Telecom Group offices raided over money laundering and tax fraud suspicion 

Nineteen people have been arrested and nine of them charged with money laundering after BuzzFeed News revealed Lycamobile’s “deeply suspicious” cash movements.

The Conservative party’s biggest donor, the telecoms giant Lycamobile, has been raided by French police on suspicion of money laundering and tax fraud, BuzzFeed News can reveal.

Nineteen people were arrested in Paris last week and nine of them were charged on Friday, including Lycamobile’s general manager in France, Alain Jochimek.

The investigation was launched in the wake of revelations by BuzzFeed News last year that the international telecoms group employs three cash couriers to drop rucksacks stuffed with hundreds of thousands of pounds twice a day at Post Offices scattered across London.

Almost €1 million was seized in raids on Lycamobile’s Paris headquarters and a series of residential and business addresses across the city, and the group’s French bank accounts have been frozen.

Among those charged along with Jochimek were cash collectors working for the company, officers of smaller companies that allegedly made illicit payments into Lyca’s accounts, and a couple suspected of acting as conduits to criminal networks.

The Conservative party has accepted donations of more than £2.2 million from Lycamobile. Its Sri Lankan-born owner, Subaskaran Allirajah, is a member of the exclusive Leader’s Group for top donors and has dined privately with the prime minister or members of his cabinet twice in the past six months. He is also close to Boris Johnson after bankrolling his London mayoral campaign.

Lycamobile has not responded to repeated requests for comment about the raid, but sources say Jochimek denied all the allegations and the other people charged could not be reached. The company has always previously insisted that its business is wholly above board and denied allegations of financial malpractice. It said the cash drops caught on film last year were just “day-to-day banking” of legitimate takings from the sale of its international calling cards.

Now the French authorities have identified payments into Lyca’s accounts from “shell” companies suspected of acting as fronts for “various networks laundering profits from crime” in intelligence documents compiled by the country’s financial crime unit.

The charges brought in a Paris court on Friday relate to alleged illicit transactions of €17 million but documents reveal the French authorities suspect the true total is much larger.

BuzzFeed News has visited 19 companies that allegedly funnelled tens of millions of euros into Lycamobile’s French accounts and found that all but one were registered at PO boxes, vacant offices, derelict buildings, or a construction site. At none of these locations was it actually possible to buy any Lyca products.

Lycamobile’s explanation for the payments is not yet known. A source close to the investigation told BuzzFeed News that prosecutors have not established the origin of the funds.

Cameron is now facing serious questions about why his party has continued to accept large donations from Lycamobile, reporting gifts of more than £870,000 since its suspicious cash movements were brought to light. The UK prime minister vowed to crack down on money laundering and offshore tax avoidance at the global anti-corruption summit in London last month, promising to “send a clear message to the corrupt that there is no home for them here”.

BuzzFeed News has reviewed evidence gathered by French investigators, spoken to sources close to the inquiry, and conducted a forensic analysis of voluminous corporate filings that paint an extraordinary picture of the questionable business practices of the Conservatives’ biggest donor. It can today be revealed that:

• Investigators say Lycamobile’s French arm received €75 million over nine months last year from the“shell” companies suspected of being fronts for laundering money. The funds were allegedly transferred into Lyca’s offshore network via a bank account in London.
• French investigators suspect Lycamobile is selling its prepaid calling cards on the black market in Paris for cash, and is then using a “a vast system of false billing” to invoice fake companies for the sales in order to conceal other illicit payments.
• Lycamobile’s own auditors declared over the past two years that they could not account for a total of £646 million that moved through ten companies in its complex corporate network.
• Lyca was previously indicted for “serious organised money laundering” in France after agents of the company were found to have moved around €36 million in cash over the border into Germany without declaring it to customs in 2006. Allirajah vehemently denied the charges, and the prosecution was dropped in 2010 after a lengthy investigation. But French investigators are now re-examining the archived case files in light of their fresh probe.
• Tax investigators at HMRC are scrutinising Lycamobile’s finances after being passed information by Britain’s National Crime Agency last year.

Lycamobile is the world’s largest mobile virtual network operator, buying international airtime in bulk from the main networks and selling it to millions of customers around the world on inexpensive prepaid calling cards. It has reported an annual turnover of €1.5 billion and pools its revenues in the UK and Ireland, but it has legally avoided corporation tax for years by moving money to the tax haven of Madeira. The group has repeatedly been criticised by its own auditors for its failure to account properly for the flow of money through its global network of more than 60 companies.

The company’s practice of depositing up to £1 million a week in cash-stuffed rucksacks at scattered Post Office branches was described as “deeply suspicious” and “worryingly characteristic of money laundering” by Britain’s former director of public prosecutions, Lord MacDonald, who called for a “serious investigation” after the bag drops were caught on film last year. BuzzFeed News also revealed that police in Sri Lanka are investigating allegations that the country’s deposed president Mahinda Rajapaksa laundered millions of dollars through the telecoms giant’s offshore empire.

Labour wrote to the Conservatives demanding that the party freeze all donations from Lycamobile while its finances were properly investigated following the revelations, but the letter was ignored.

However, investigators at the French government’s anti-money-laundering unit began probing Lycamobile’s accounts after BuzzFeed News published its investigation last October. They passed a secret intelligence file to prosecutors at the Parquet National Financier (PNF), who opened an official judicial investigation in January. Now, a source close to the investigation says that prosecutors suspect they may have uncovered a “huge European money-laundering system”. The charges were confirmed in a statement from the PNF sent to BuzzFeed News on Friday.

Statement from France’s Parquet National Financier on 17 June 2016

“On Wednesday and Thursday, 19 people suspected of being involved in a money-laundering system implicating Lycamobile and Lycamobile Services were arrested. The arrests were part of a Paris judicial investigation into money laundering and VAT fraud. Several places in Paris and its outskirts were raided and police seized about 130,000 euros in cash and 850,000 euros from bank accounts. Nine people were brought in front of a judge on Friday and charged with money laundering among other things, and eight were released on bail while one man was remanded in custody. The charges relate to money laundering of at least 17 million euros and VAT fraud of several million euros.”

The story of how the French authorities closed in on alleged financial crimes by the biggest donor to the governing party of the UK can today be revealed.

Read more: BuzzFeed

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