The inner sanctum of the Bank of England was penetrated by a “powerful criminal network” linked to money laundering, terrorism, and contract killings, according to explosive intelligence that the police and MI5 tried to keep secret.

The details of the covert operation – which uncovered a suspected gangland plot so audacious detectives feared it could “destabilise” the British economy – are revealed for the first time in secret police files seen by BuzzFeed News and interviews with several well-placed sources.

The infiltration was discovered when detectives tapped the mobile phone of a Ferrari-driving businessman suspected of laundering money “on a vast scale” for organised crime gangs and reported hearing him receiving secrets from inside the Bank.

The major national security breach has been kept tightly under wraps by police chiefs and spies at MI5 for more than 16 years, shielding those implicated in the highly embarrassing scandal from public, parliamentary, and judicial scrutiny.

Although police warned senior bankers that a mole was passing inside information to a businessman connected to organised crime, the leaker was never identified, no one was sacked, and the businessman remains at large.

The Bank of England is now facing serious questions about how gangsters gleaned Britain’s most closely guarded financial secrets and how the public can be confident no such breach will occur again.

In 1998, as part of a major probe codenamed Operation Beregon, the detectives reported that they had eavesdropped on a high-rolling young stockmarket speculator receiving highly sensitive information about the bank’s monetary policy committee (MPC).

The committee meets in private each month to set Britain’s base rate of interest, which affects every aspect of the country’s economy, and the confidentiality of its deliberations is sacrosanct. Policymakers are made to sign a “declaration of secrecy” and are subject to “strict purdah rules” before decisions about interest rate changes are announced publicly. It is not suggested that the leak came from a member of the MPC.

But the businessman was believed to be exploiting a sexual relationship with the wife of a Bank of England insider to garner tip-offs about upcoming changes that could be used to gamble on the financial markets.

The threat to national security was deemed so severe that the investigation was swiftly taken over by spies at MI5, and the affair has remained a closely guarded secret for years.

A Bank of England source confirmed that in 1998 it was alerted to sensitive police intelligence that “two people were talking about inside access to the Bank’s information”.

The source said: “Leaking monetary policy stuff would have been, and still is, a hanging offence,” and an immediate internal inquiry was launched. But it failed to identify where the leak was coming from, so no action was taken and the case was closed.

However, some details of Operation Beregon are known to be contained in legal documents filed at the High Court last year by the lawyers of a former senior detective involved in the investigation who is now suing Scotland Yard.

PA / BuzzFeed

The claim also contains other allegations of widespread police and political corruption. Lawyers acting for the Metropolitan police have successfully argued that the whole file should be sealed from public view to protect the safety of its officers and their methodology in fighting organised crime.

The Yard was granted a rare secrecy order by the High Court in October 2014, and although it was rescinded at a hearing on 20 July this year, the file has not yet been made available to the public.

But today BuzzFeed News lifts the lid on a cache of leaked police files and extensive interviews with police sources to give the first full account of Operation Beregon.

The London-based businessman at the centre of the investigation still cannot currently be identified for legal reasons but is referred to in this story as “The Suit”. He denies ever having laundered money or operated as a front for organised crime figures, and says he never received or acted upon inside information from the Bank of England. The allegations, his lawyers said, were “without foundation and appear to have been based on the unlawful disclosure of telephone interception material”.

The Beregon files seen by BuzzFeed News draw upon “a vast amount of intelligence” detailing his suspected links to notorious gang bosses including the north London crime lord Terry Adams. They also reveal The Suit’s suspected involvement in drug trafficking linked to international terrorism. His criminal associates were also suspected of involvement in contract killings in Britain and abroad.

The files also document the tapping of his mobile phone that allowed detectives to listen in on his calls with a coterie of lovers across London. One of them, sources say, was believed to be the wife of the Bank of England insider.

A source with knowledge of the operation said: “Organised crime’s infiltration of the City of London and financial services industry has long been a concern. Intelligence such as this was a real risk to the economic well-being of the UK and shouldn't have been suppressed.”

PA / BuzzFeed

In January 1998, an intense intelligence-gathering operation with three targets was taken over from Scotland Yard by detectives from the newly formed National Crime Squad.

Police files show that two 51-year-old east London gangsters and The Suit, in his early thirties, were suspected of being “the heads of an organised and powerful criminal network”. Internal documents described Operation Beregon as “a pro-active investigation … into the activities of criminals of the highest echelon”.

The targets were, the report said, “not only involved with numerous criminal gangs within the United Kingdom but also four separatist terrorist groups across the world and criminal organisations including the ‘mafia’ and the most powerful Dutch criminal organisations”.

Target 1 was identified as "The Head” of the trio and Target 2 was deemed “The Criminal Mind”. The pair were known to the police as career villains with convictions going back many years and were suspected of involvement in the supply of drugs and firearms to “criminals and terrorists”, including “8 shipments of machine guns, grenades and semtex” to the Provisional IRA, as well as having been linked to gangland assassinations.

The Suit, meanwhile, was believed to be “the organisation’s front” in the straight world of business and finance. Detectives noted: “He launders money on a vast scale.”

Detectives at Operation Bergon linked The Suit to a range of expensive cars including a red Ferrari, a black Porsche, a silver Mercedes, an Aston Martin, and a Bentley Azure. His lawyers told BuzzFeed News that he “likes luxury cars” and had owned these vehicles.

Detectives also found that The Suit owned “a number of properties in and around the west end of London and Essex area [and] a number of girlfriends at various premises”.

This was a man of the most expensive tastes, but although he had directorships in a variety of telecoms companies, his extravagant spending vastly exceeded any legitimate earnings — leading detectives to believe he was living the high life on dirty money.

The detectives noted that The Suit sometimes lived in Dubai and was believed to have links with Iran, and that he had been a “ghost” in the tax system for many years until reaching a settlement with the Inland Revenue just before Operation Beregon began.

An intelligence report noted: “He appears to be the weak link leading to an opulent lifestyle with no apparent means or income.”

He was strongly suspected of laundering the dirty millions being raked in by his criminal associates, and the detectives wanted to follow the money. In February 1998, they applied for permission to tap his phone. Soon Operation Beregon was eavesdropping on The Suit’s conversations with lovers, businessmen, and criminal conspirators.

Surveillance photographs of The Suit (top right) meeting the notorious gangster Terry Adams (top left) and his associates in London.

Supplied / BuzzFeed

One intriguing name that cropped up repeatedly was someone The Suit referred to as “Uncle”. Detectives would later establish that this was code for Terry Adams, the head of north London’s most feared organised crime gang. The Adams family, or “A-Team”, had become Britain’s foremost criminal organisation by the late 1990s, suspected of major drug trafficking, fraud, and several unsolved gangland executions.

Terry Adams and his two brothers, Patrick and Tommy, needed “enablers” – professional front people in the “straight” worlds of finance, law, and property – to launder their dirty cash and distance them from their assets.

Police documents show that the Adams brothers typically cleaned their criminal proceeds through the arms-length ownership of properties, clubs, and bars in Islington and the West End, where cash is king. Other criminals would come to them for permission to do business on their patch in return for a cut, and the Adams name was also a franchise to be leased to those with a good scam. A senior police source who investigated the family likened the set-up to “a conveyor belt of criminal opportunities” from which they took “a corner”.

Solly Nahome was the family’s chief money launderer. He operated from a jeweller’s and a front company called Pussy Galore in Hatton Garden where he “koshered up” millions of pounds in dirty money by making legitimate investments for the family.

The police suspected that The Suit’s knowledge and contacts in the booming financial markets offered Terry Adams a different entrée into the City. Then, in November 1998, Nahome was assassinated on his north London doorstep, and The Suit appeared to be in pole position to take his place as chief launderer to the Adams family.

The Suit’s lawyers told BuzzFeed News that he had “never had any personal relationship or business dealings with Terry Adams”, but later acknowledged that he had met the crime boss on three occasions and knew Nahome “through his shop in Hatton Garden at which [he] bought and sold watches and jewellery”.

In the wake of Nahome’s assasination, detectives at Operation Beregon were desperate for intelligence on who would strike such a key associate of the Adams brothers. Permission was granted to bug a business premises in Essex on the grounds that it would provide good intelligence on what was happening inside the crime family and possible leads on the murder.

The listening device produced a wealth of intelligence about drug trafficking and people smuggling. Detectives reported that the Suit and two suspected kingpins were secretly recorded discussing how British organised crime was structured and regularly met to “carve up” the criminal landscape in joint ventures just as Italian mafia families had done in the United States.

At the same time, the detectives continued listening intently to the private calls of the man they believed was poised to replace Nahome as the money man for Britain’s most dangerous organised crime network.

PA / BuzzFeed

The officers at Operation Beregon were stunned when the bugged phone calls between The Suit and one of his lovers began to reveal that this suspected gangland frontman had parlayed his way into London’s most revered financial institution.

According to well-placed official sources from inside the investigation, The Suit was recorded sweet-talking a lover who had close knowledge of the Bank of England and the deliberations of its most secretive committee.

The detectives gleaned from the calls that the woman The Suit was pumping for information was the wife of a Bank insider.

“He was talking to [her] always at the time the monetary policy committee was sitting,” one source said. “They would discuss whether interest rates were going to rise or fall.”

The MPC had only just been set up in 1997 in a landmark move by the new chancellor, Gordon Brown, to make the Bank of England independent of the government in setting interest rates.

It was comprised of eight members including the then governor Eddie George and his future replacement, Sir Mervyn King, along with a selection of the country’s most eminent economists, and its meetings were governed by the strictest code of secrecy.

Interest rates are the government’s key tool in controlling inflation, and at the time of Operation Beregon they were fluctuating as the new committee grappled with the rising cost of living. The base rate had climbed from 6% in early 1997 to 7.5% by mid-1998, and was followed by a dip to 5% a year later.

In a booming stock market, a savvy speculator armed with inside knowledge of what the MPC was about to do could cash in by betting on movements in financial indexes or buying future share options. At the time there was a longer period between decisions about interest rates being made and the public announcement than there is today.

The Suit’s lawyers said he had “never received such information, let alone acted upon it. Further, he has never had a sexual relationship with the wife or partner of any Bank of England insider.”

The apparent compromise of the MPC alarmed detectives because The Suit was suspected of fronting for some of London’s most dangerous criminals, as well as being linked to international mafia groups and terrorist organisations.

The threat to national security was considered so severe that the detectives urgently referred their intelligence to Britain’s spymasters.

Senior intelligence officers from MI5 and other agencies were given a detailed presentation on Operation Beregon in a meeting room at Spring Gardens, the anonymous building in Vauxhall from where the phone taps were controlled.

In a PowerPoint presentation seen by BuzzFeed News, the spies were briefed about the two older men in the trio and their suspected links to other organised crime syndicates in Holland and the UK. The Suit was described as a “money launderer [with] international connections”. All three men were linked during the briefing to “terrorist groups” involved in drug trafficking and a plot to smuggle immigrants.

Sources say the compromise of the MPC was discussed in detail. In a section of the presentation marked “Confidential: extremely sensitive information”, detectives warned that the criminal network had access to “financial inside information” with “political implications” and warned that there was a risk of “destabilisation of [the] UK economy” from “dirty money within the banking structure”.

PA / BuzzFeed

The spies took control of the tap on The Suit’s mobile phone almost immediately. “MI5 put people in the middle,” said a source. “The spooks would not tell the police what they did with the information.”

However, sources said word got back to detectives that MI5 had quietly approached The Suit. He denies this.

But details of how organised crime was believed to have penetrated the secrets of the Bank of England were kept hidden.

A tape of the discussions between The Suit and the head of the trio about how Britain’s most notorious gangs acted as a criminal cartel was passed by the detectives at Operation Beregon to a senior Met officer. But sources say police chiefs still refused to accept that the country’s organised crime groups were anything but loosely affiliated.

When approached this week by BuzzFeed News, The Suit’s lawyers said that the two older targets of Operation Beregon were “the landlords of a property rented by one of [his] businesses from about 1996 to 2008” but that “he has no other connection with them”. They said he “was not aware of any allegation that either of them was involved in crime” and “has had no contact with them for many years".

Operation Beregon closed down shortly after MI5’s intervention without making any arrests, although Terry Adams pleaded guilty to money laundering and was sentenced to seven years in prison in 2007 after a joint police and MI5 operation.

But now the former detective chief inspector who helped run Operation Beregon is suing Scotland Yard in a case that threatens to blow open the secrets of the Met’s covert operations into organised crime.

The claim brought by former DCI David McKelvey and his former colleague DC Darren Guntrip alleges that the force failed to protect them during a difficult organised crime operation and that evidence of political and police corruption was repeatedly covered up or ignored.

Police lawyers sought to prevent publication of the contents of the legal claim during a private hearing in front of Master Barbara Fontaine at the High Court nine months ago.

She granted the secrecy order at the same time as the Met faced criticism in parliament from MPs over its mistreatment of police whistleblowers.

The Met said it was seeking to protect the officers’ safety and its methodology against organised crime by keeping the legal documents secret. But the claimants suspect the intention was to protect the force from criticism over its alleged failure to tackle “systemic” corruption.

The secrecy order was rescinded on 20 July during a pre-trial hearing, paving the way for the file to be unsealed within days.

After being contacted by BuzzFeed News yesterday, Bank officials began a frantic search of its paper archives, while lawyers were dispatched to the High Court to seek access to references to Beregon in the case file. They are also seeking access to transcripts of The Suit’s bugged phone calls.

After examining personnel records, a spokesperson for the Bank confirmed that no leaker had been identified, disciplined, or sacked.

“The Bank of England was approached regarding a potential issue by the police at the time," he said. "The Bank followed up and nothing was found to substantiate the claims of a leak.

“Any member of the Bank’s staff signs the Bank’s Declaration of Secrecy … There are also strict purdah rules about policymakers speaking on or off the record in the days before a monetary policy decision. MPC decisions have always been tightly held … The Bank has the means to watch out for any surprise or premature market moves before a key policy decision is announced.”

The Met said it was “not prepared to comment on highly selective elements from a complicated and long running case outside of the court process” but that it would “continue to defend the claim”.

The National Crime Agency, whose forerunner the National Crime Squad ran Operation Beregon, declined to comment.

A trusted royal guard spills the secrets of a decade of misbehaviour inside Buckingham Palace. “The Queen,” he says, “is going to be mightily pissed off.”

For 10 years Paul Page was a trusted officer in the Metropolitan police's royalty protection command, which guards the Queen and other royals – but he was also secretly running an elaborate Ponzi scheme from inside Buckingham Palace to fund a lifestyle of hard drinking and degenerate gambling. In a new book, For Queen and Currency, Michael Gillard has revealed the full story of Page's decade of misbehaviour. Here are 15 of his craziest confessions about the antics of a wild cabal within the Queen's guards.

1. The guards would turn up to work drunk and disorderly – with disastrous consequences.

Rebecca Hendin / BuzzFeed

Drinking was a "huge part of the culture" among the Queen's guards, but such was the need to have a full relief of armed officers on duty at all times that Page said even those who turned up smelling strongly of booze were allowed to book out weapons and get on with the job. If they were seriously drunk they might be advised to sleep it off in one of the palace rooms, or given medical relief in the form of "a pack of mints and a Lucozade". Page recalled one incident when a senior official in the royal household was coming through the palace gates, and instead of lifting the barrier, a hungover officer accidentally pressed the underground ramp button, sending the woman's car into the air.

Life on the royalty protection command was seen as an easy gig and a nice little earner. Page said that he and some colleagues wangled their police friends off the beat and into the palace by tipping them off about the questions they would be asked at interview. Even without cheating, new recruits would have been hard-pushed to fail the flimsy entry test. Page says they were merely required to identify a mugshot of a prominent royal and answer questions such as, "Is it ever OK to read a book while guarding the gate to the Queen's private quarters?" (Answer: no.)

View Entire List ›

Rex / Getty / Lynzy Billing / BuzzFeed

Scotland Yard faces a major corruption scandal, with police officers under suspicion of taking bribes from security firms working for bars and strip clubs across the West End, BuzzFeed News can reveal.

Sergeant Frank Partridge, dubbed “the Sheriff” of Soho, and Constable Jim Sollars, nicknamed “the Gruffalo” for accepting so many free dinners, have both been arrested for conspiracy to commit misconduct in public office.

Anti-corruption detectives have also swooped on three security bosses at two firms – one of which promotes itself as official partner of the Metropolitan police in delivering London’s key anti-terrorism strategy.

The two arrested officers work in Scotland Yard’s Westminster licensing unit, which holds vast power over the borough’s clubs and bars because it controls their ability to open late, serve alcohol, and play music.

They are suspected of forming corrupt relationships with two security firms, TSS Security and Profile Protection, and are being investigated over allegations that they accepted improper inducements ranging from free dinners, drinks, and club entries to bundles of cash.

In return, the officers face allegations of putting pressure on Soho’s nightspots to use the firms to supply their bouncers and security. Sources say club owners feared that they could lose their licences if they did not comply, and believed that by hiring TSS or Profile they would get protection from police interference at their venues.

TSS Security, which sits on the steering committee of Project Griffin, the Met’s anti-terror initiative, is central London’s biggest door security firm, holding a near monopoly on the hundreds of venues across the West End. Its managing director, Terry Neil, and its head of operations, Douglas Thompson, himself a former Westminster police officer, were arrested on suspicion of being part of the alleged conspiracy. Hassan Serdoud, owner of Profile Protection, which has emerged as the biggest rival to TSS in the past two years, was also arrested.

All five arrested men deny any wrongdoing. They have not been charged and the allegations against them remain unproven while the investigation is ongoing. They are due to answer police bail at the end of the month.

Anti-corruption detectives raided the offices of the Westminster police licensing unit, both firms, and the home addresses of the men they arrested in June this year. They announced the move as the culmination of a “long running intelligence operation led by our anti-corruption command”. But whistleblowers have raised fears that even if the corruption is proved, the true scale of the problem could be swept under the carpet and only junior officers “hung out to dry”.

Security industry insiders aggrieved at having lost lucrative contracts to TSS and Profile say they suspect the alleged corruption may have reached higher echelons of Scotland Yard and that other public officials could also be involved.

The rival security industry boss who initiated the corruption complaint compiled a document for detectives setting out the allegations that has been seen by BuzzFeed News. It claims that improper relationships exist between public officials and security firms in Camden and Croydon as well as Westminster.

“The licensing teams of the above boroughs have created their preferred security company and those companies dominate ... and the rest of us suffer in terms of gaining a market share,” the letter, drafted by Tony Clarke of the rival firm UK Security Facilities, said. “The Licensing Police of Boroughs are very powerful individuals, because they can ruin people’s businesses.”

BuzzFeed News has investigated the biggest alleged police corruption scandal to sweep Soho since the ‘70s and uncovered secret details of the two-year covert operation that culminated in the recent arrests. Extensive interviews with security industry insiders, sources within Westminster council and the Met’s licensing unit, current and former employees of TSS Security, and West End club owners have revealed how a bitter battle for control of Soho’s nightspots has plunged Scotland Yard into crisis.

Left: Jim Sollars, who is said to have lost two stone since his suspension, on his way to the gym in Stansted this week. Right: Frank Partridge strolling outside his Bedfordshire home.

Michael Gillard / BuzzFeed

Sergeant Frank Partridge and Constable Jim Sollars made an odd couple patrolling the streets of Soho under the neon lights of its clubs and bars, but they were as inseparable as they were unmissable.

Partridge, a trim 42-year-old sporting long, thin sideburns, was dwarfed by Sollars, a decade older and a giant of a man at 6’8” and 18 stone. The pair quickly hit it off when Partridge joined the Westminster licensing unit from a senior role in the borough’s gangs division in 2012, and a friend said they were soon spending so much time off-duty eating and drinking on their patch that their partners at home began to joke that they must be having affairs.

The two men were the public face of the licensing unit and spent much of their time out in Soho meeting restaurateurs, nightclub owners, and bar managers with issues about their late-night drink and music licences.

Soho has been a den of vice and entertainment since its days as the hub of London’s sex industry, and the neighbourhood has more restaurants, clubs, pubs, and bars than almost anywhere else in London. Partridge and Sollars held sway over the lifeblood of those venues: their ability to serve drinks and play music late into the night. If there was any sort of disorder, from a drunken punch-up to a drug overdose, the cops could refer the venue’s licence to the sub-committee at Westminster council for review. Millions of pounds are at stake when a licence comes into jeopardy, so club owners rely heavily on security companies to maintain order.

Sollars has spent all his 35 years in the police working in Soho and central London, and he was already a well-known face in the area in 2009 when he moved to the licensing unit to deal with applications. Friends said he had never wanted to rise up the ranks, cherishing the opportunity his patch provided to indulge a love of haute cuisine and fine wines. The image of his hulking frame eating and drinking his way through Soho’s many establishments for free had earned him the affectionate nickname “the Gruffalo” among some locals. Sollars also loved jazz, according to his friends, and was allowed free entry to Ronnie Scott’s, where he liked to prop up the bar.

Partridge was more ambitious: He told colleagues that he had worked undercover in a vice unit and had also served on the Territorial Support Group, the Met’s public order division. He carried the air of a seasoned street cop who knew how the system worked as he took on his new role as a licensing crime prevention and enforcement sergeant in 2012.

But he was not immune to the allure of the Soho club scene. Like his new partner, insiders say Partridge quickly took to staying out late with new friends he was making in the nocturnal world of nightclubs and security. A well-placed source on the Westminster police licensing unit said Partridge had told him he visited strip clubs on his beat when his shift had ended.

The businesses in the area were naturally keen to make sure they stayed in the officers’ good books, and industry sources claim the two cops were happy to accept the hospitality on offer at the venues they visited.

Scotland Yard’s gifts and hospitality policy says officers must “politely decline” any freebies they are offered, unless doing so would seriously damage working relationships, in which case gifts should where possible be donated to charity. The policy covers “beverages and light refreshment”, “offers of free meals”, “entry to clubs”, and even stationery. But there is a grey area: Officers are allowed to make an exception to attend working lunches and dinners that will benefit the Metropolitan police. They must use their discretion, and the stakes are high: The policy notes that “even a small gift to a sole or key decision maker may fall within the scope of the Bribery Act 2010 if it could be perceived to elicit the improper performance of that function”. All gifts, whether accepted or declined, must be recorded on the Met’s hospitality register.

The licensing police insider told BuzzFeed News that Partridge in particular considered socialising with business owners in Soho a key part of his intelligence-gathering duties. “I think what Frank was doing was having drinks with people. Some he was more friendly with than others,” the source said. “He would give people a drink to find out what was going on, the gossip. If he had proper intelligence he would know how to register people as informants.”

Intelligence-gathering is an important part of the duties of the licensing police, but one security industry insider said the hospitality on offer in London’s biggest entertainment district had become “a great source of indulgence” to Partridge and Sollars.

It wasn’t just the bar and restaurant owners extending the hands of friendship to the two officers. One of the most significant relationships they formed was with Terry Neil, the boss of the dominant local security firm, TSS.

Neil was a former bouncer who ran TSS with his then wife, Soraya. The company was formed in 2001 by Michael Hall, a millionaire property developer and the son-in-law of the actor Michael Caine, but he resigned as a director in 2005, leaving the Neils at the helm. The pair have recently separated but continue to work together. The firm grew rapidly and by 2012, when Partridge arrived at the licensing unit, it was the dominant security company in the borough of Westminster, believed to control up to 80% of the doors in the area.

Terry Neil was considered a smooth operator who drove a Porsche and had a taste for Premier Cru Chablis. His operations manager, Douglas Thompson, was another giant of a man, a former Westminster cop who was said to be reluctantly medically retired because he suffered from bad knees following years as an amateur wrestler.

Neil quickly formed a friendship with the two officers, and they could be found drinking late at night together and enjoying meals at expensive restaurants such as Bocca di Lupo in Soho, where a police friend said they took it in turns to pay. Sometimes they would be joined on nights out by Thompson or Soraya, a glamorous multilinguist from Amsterdam who worked as the firm’s finance director.

By the time Partridge and Sollars were forming their friendship with Neil, concerns were already spreading that the firm had become far too close to the police unit that held sway over the licences of the area’s clubs and bars.

A TSS insider had walked away from the company following an acrimonious commercial dispute several years before, and towards the end of 2013 he approached one of the authors of this article with a series of explosive allegations about the firm. He alleged that Terry Neil had formed inappropriate relationships with police officers within the Westminster licensing unit. The insider said Neil was entertaining groups of officers at strip clubs as far back as 2007 – before Partridge and Sollars arrived on the scene – and inducing them to put pressure on club owners to use his firm to supply their bouncers. The insider recalled: “I’ve been up to one of Terry’s bars where there have been licensing police surrounded by strippers and off their heads.” He later elaborated: “I walked into the Red Rooms and saw this copper with this huge [stripper] on his lap with her tits in his face.”

It was, he said, pointless to report his concerns: “If I went to the police and made a complaint about Terry Neil … we’d have no chance of a fair hearing.” When contacted by BuzzFeed News this month about the anti-corruption investigation into Neil’s relationship with Partridge and Sollars, the former insider said: “I think it’s a lot larger than just the people who have been arrested and I think it goes back a lot longer. I’ve been told that it went ... incredibly high.”

TSS strongly denied all the allegations made by the former insider and said the firm was the “victim” of a smear campaign by people who had “motives to lie”. Soraya Neil, who is not the subject of any criminal complaint, represented the company at an 80-minute meeting with BuzzFeed News at the TSS offices in North Acton last week. Though she repeatedly refused, on legal advice, to comment on the police investigation, she strenuously denied that any bribes had been paid to police officers and insisted that the firm had won so many contracts in Soho because of its excellent customer service. The firm’s website – which boasts of its “exemplary relationships” with the Westminster police – was quickly taken down after the meeting but can still be viewed in Google’s cache of old webpages.

By midway through 2013, rival security firms were starting to become enraged by their suspicions that TSS was using its police connections to take over so many doors in the borough and starving them of business.

The most vocal was Tony Clarke, a former Met detective who left the police in 1986 after five years as a surveillance officer and built a business specialising in undercover operations for pub companies experiencing stock and till theft. He later moved into door security and set up UK Security Facilities, which vied with TSS for lucrative contracts in Westminster and London’s other entertainment hubs.

Clarke said he fears no one and sees himself as a crusader standing up for fair play in the security business and policing – though Neil branded him a “narcissist” and a liar who was jealous of his rival’s success. By mid-2013, Clarke said he had fallen out with the Westminster police licensing unit after hearing from potential clients that Partridge and Sollars were telling club managers to use TSS instead of his own firm. Other security bosses confirmed that they had experienced similar problems.

BuzzFeed News has spoken to four security industry rivals who claim Partridge was applying pressure on club owners to use TSS. Most asked to remain anonymous because they feared their businesses could fall foul of the licensing department if they spoke out.

Tony Clarke

UK Security Facilities

“Tony was the only one who stuck his head above the parapet and he’s right to do it,” one said.

Clarke said: “Frank thinks he is the sheriff of London, that he can push his weight around. Whatever Frank does, whatever Frank says goes. I’ve had a ding-dong with Frank over the phone. I rang him up and told him ... I was coming after him.”

A source inside the licensing unit said the two officers were irritated by Clarke's allegations and had begun “winding him up” by bad-mouthing him in Soho.

Clarke caught wind of this. He said he then decided to notify the Met’s anti-corruption squad. He prepared a letter summarising the allegations in the summer of 2013 that claimed “massive corruption between TSS and the Metropolitan Police” had allowed the security company to control a “monopoly” of door contracts in Soho and central London. He alleged that the police licensing unit was recommending TSS to club owners as the Met’s preferred security provider and that “money is changing hands for this assistance”.

Clarke wrote that he suspected the corruption had been going on for years before Partridge and Sollars arrived on the scene, and that now they too were acting improperly by telling club owners that their licences would only be secure if they used TSS.

He told BuzzFeed News that detectives from the Met’s directorate of professional standards came to see him in the autumn of 2013 and that he repeated the allegations and handed them two tape recordings of conversations he’d had with club owners about Partridge allegedly pushing TSS.

He followed up after the meeting with a second letter complaining further about the relationships between TSS and the licensing police. “We believe those relationships are either corrupt or not compatible with policies, procedures for teams or individuals who holds a position in a public office,” he wrote. “Whilst we cannot prove that the relationships exist for financial or other rewards, we know that it is a barrier to competition and fair play.”

BuzzFeed News interviewed the owner of the Avalon nightclub – one of the venues Clarke claimed had been pressured into using TSS. Saeed Azimi, a 29-year-old Afghan businessman, said he met Partridge in 2014 and the officer had advised him that he would be more likely to keep his licence after a shooting at his nightclub if he employed TSS instead of Clarke’s firm. “Frank ... alluded that they were good. He said ... it would look better if I was using TSS,” said Azimi. He added: “Everyone knows in Westminster that if you want to run a club or a bar you need to use [TSS] in order to get more protection.” Azimi’s licence was ultimately withdrawn by Westminster council.

Terry Neil (pink shirt) and Douglas Thompson (suit) in Soho in September 2015.

Michael Gillard / BuzzFeed

Getty / i-images / Lynzy Billing / Sian Butcher / BuzzFeed

This is Part One of a BuzzFeed News investigation.

Part Two: Lycamobile’s Offshore Empire Is Embroiled In Sri Lanka’s Hunt For Stolen Assets.

Part Three: Tory Donor Reported To Cops For “Money Laundering” After Rival Spied On Cash Drops.

One of the Conservative party’s biggest corporate donors, Lycamobile, is facing serious questions over its finances after three bagmen were secretly filmed dropping off rucksacks stuffed with hundreds of thousands of pounds twice a day at Post Offices across London.

A five-month investigation by BuzzFeed News has revealed that the Lyca telecoms group deploys three men to drive around in an unmarked people carrier depositing bags of money, which have totalled up to £1 million each week. Legal and financial experts said the “deeply suspicious” cash deposits should be urgently investigated.

Lycamobile has donated more than £1.3 million to the Conservative party since David Cameron came to power, including over £500,000 in this year alone, despite avoiding paying any corporation tax for years by moving revenue out of the UK through a complex offshore corporate network.

The evidence of Lyca’s unorthodox Post Office deposits comes in the wake of criticism from its new auditor, KPMG, which unearthed almost £46 million of previously undeclared revenue earlier this year and said the company had failed to properly explain the gap in its finances so it had been impossible to tell whether “adequate accounting records” had been kept.

Internal Tory emails show that the party accepted a large donation from the telecoms giant just days after the party’s compliance department raised concerns about its chaotic accounting in 2012. The gift bought the company’s Sri Lankan-born owner, Subaskaran Allirajah, a place in David Cameron’s private dining club for top donors, and the emails show he promised to advise the party on business and help deliver British Asian votes.

BuzzFeed News can also reveal that authorities in Sri Lanka are launching an investigation into a key offshore company in the Lyca empire as part of an international probe into allegations of corruption by the country’s despotic former president Mahinda Rajapaksa.

There is no evidence of any connection between the corruption allegations in Sri Lanka and the mysterious cash deposits in London. However, the Tories are now facing renewed pressure to sever their ties with the company, having previously brushed off warnings about its links to Rajapaksa, who is accused of presiding over a kleptocracy and multiple crimes against humanity during his decade in power.

Lyca declined to answer detailed questions from BuzzFeed News but said the police were aware of security processes in place at the east London depot where it stores its cash. It said the deposits were "day to day banking," sanctioned by the Post Office. It has previously said that it is a cash-rich business because it collects money from shop owners selling its prepaid international calling cards and SIMs all over London.

However, experts said the company’s unorthodox method of depositing cash at scattered locations should raise a red flag with the anti-money-laundering and tax authorities. Lord MacDonald QC, the former director for public prosecutions, called for an urgent investigation into Lyca’s financial activities after seeing the evidence gathered by BuzzFeed News. “The use of unmarked vehicles, the lack of any security arrangements, the repeated deposits of huge sums of cash to multiple branches of the Post Office, is all conduct that cries out for explanation,” he said. “Frankly, this is not the way a normal ... business deposits its cash. It is deeply suspicious and it demands serious investigation.”

Senior Labour MPs joined calls for an urgent investigation and demanded that the Tories freeze all further donations from Lyca and consider handing back the money they have already accepted. Meg Hillier, the chair of the powerful Commons public accounts committee, said HMRC should launch an inquiry into the company's financial behaviour, and her predecessor, Margaret Hodge, said the revelations were "absolutely shocking".

The bagmen make their drops at Canning Town Post Office in July.

BuzzFeed News

The twice-daily rucksack drops to multiple Post Offices are especially bizarre because the security firm G4S was filmed visiting the Lyca depot and collecting as many as 40 sacks of money at a time in an armoured van – the normal way for a cash-rich business to transport its takings. The company declined to explain why it is also sending staff to multiple Post Offices with bags of money every day when it has an armoured and properly audited cash-in-transit service at its disposal. Additionally, the Post Office has its own secure cash collection service, which charges just £220 to pick up £1 million a week and drive it directly to the bank.

The Post Office has not explained why Lyca’s unusual cash transactions have been allowed to continue, citing client confidentiality, but it said in a statement that it was fully compliant with all its regulatory obligations and any suggestion to the contrary would be "unfounded".

However, staff in the branches visited by the couriers told BuzzFeed News they felt uncomfortable taking such enormous sums of cash and had repeatedly flagged the deposits as suspicious but were instructed to continue accepting the money.

BuzzFeed News has confirmed that around 18 months ago Santander Bank reviewed the unlimited amounts the company was previously allowed to deposit because of the large volumes of Lyca's cash flowing through the Post Office into its accounts. It imposed limits of between £100,000 and £240,000 on the money the couriers could drop off at each branch after a series of Post Office tellers raised suspicions.

A senior Santander insider said that the evidence BuzzFeed News had assembled of how Lyca deposits cash was “eye-opening” for the bank. “I think this is something that we’ve identified and are attempting to do our appropriate duty on,” the source said. He also confided: “I suspect this is not the end of this one. I suspect things will progress probably partly due to the work you guys are doing.”

The Lyca group buys surplus international airtime and data from the major telecoms operators wholesale and sells it on cheap prepaid calling cards and SIMs to its 14 million customers – mostly migrants from Asia, Africa, and South America living in Europe – so they can “call the world for less”. Many of its customers pay for its goods in cash, although a Lycamobile insider told BuzzFeed News it sells the majority of its calling cards through large distributors that buy in bulk rather than directly to shop owners. Such distributors would not usually pay telecoms companies in cash but instead use bank transfers or other safe and efficient means.

Allirajah, the company’s founder, is worth £160 million, according to the Sunday Times rich list. The Lyca group reported global sales of £1.1 billion last year, but it has consistently avoided paying UK corporation tax by moving revenue to the tax haven of Madeira through an intricate network of more than 60 companies.

The Tories have faced down heavy criticism for taking money from the firm, which was branded a “tax offender” by Margaret Hodge, then the chair of the Commons public accounts committee, two years ago. Allirajah, who spent £210,000 on a bronze bust of Margaret Thatcher at the party’s exclusive Black and White Ball this year, bought a membership in Cameron’s exclusive leader’s group for top donors.

The party is now facing mounting pressure to sever its ties with the company amid serious concerns about its unorthodox cash movements, chaotic accounting practices, avoidance of tax, and alleged links to a defunct foreign regime mired in corruption claims.

BuzzFeed News began its investigation after being tipped off that cash couriers working at Lyca’s depot at a business park in Beckton were driving to branches of the Post Office and making suspiciously large cash deposits.

In a surveillance operation over five weeks in June and July this year, our reporters watched the men leave the depot in an unmarked black people carrier and followed them to Post Offices scattered across east London. They were secretly filmed handing sums of up to £240,000 over the counter in a red-and-black rucksack. BuzzFeed News established that at least 10 separate Post Office branches have been regularly used to deposit cash by the couriers dating back several years.

The three bagmen had a well-practised routine, but they were sometimes visibly tense and were occasionally seen arguing as they conducted their cash rounds.

They would set off around 9:30am each morning for a Post Office, where two of them would get out on foot to drop off the rucksack and a third would wait at the wheel of the people carrier nearby. Inside the branch, one would sit or stand with his back to the wall scanning the room while the cash was being deposited by the other. The rucksack was shoved through the parcel-drop hatch and taken away to be counted by a member of staff while the couriers waited. They then presented a Santander bank card, which was used to deposit the funds into one of the company’s bank accounts, before retrieving the empty rucksack and returning to the people carrier. They repeated the routine almost every afternoon.

The bagmen load up on cash at AA Com.

BuzzFeed News

On one occasion in July, a G4S driver in a security helmet and full-body armour was filmed arriving at the depot and loading his van with more than 40 bags of cash over a half-hour period. While the driver was at work, the three bagmen backed out of the yard past him in their unmarked people carrier and were followed to Hornchurch Post Office, where they deposited another bag of cash.

In some cases, Post Office staffers said the Lyca employees had offered cashiers mobile phones and calling cards, which they were forbidden from accepting. One teller was secretly filmed taking what appeared to be phone and a SIM card from one of the men. She could not be reached for interview.

In between the two Post Office drops in the morning and afternoon, the couriers were followed across the city to the offices of AA Com, a distributor of international calling cards above a beauty salon in Norbury, south London. There, they were filmed each day unloading from the boot of the people carrier boxes that were taken into the company’s hallway. Then they loaded an orange trolley with more boxes and, often, heavy bags full of cash from inside the office, which were wheeled along the pavement and transferred into the vehicle.

Staff at AA Com told BuzzFeed News reporters who visited the office that it sells its stock to agents, most of whom pay by bank transfer, but that some of its smaller customers pay in cash, which it either banks or passes to the Lyca couriers when they visit. However, the company declined to answer detailed questions sent in writing about why it so regularly hands over such large volumes of cash in plastic bags to the men from Lyca. There is no suggestion that AA Com is involved in impropriety.

After the surveillance was concluded at the end of July, BuzzFeed News interviewed staff members at six of the Post Offices where the couriers had been followed: Bow, Lea Bridge Road, Walthamstow, Canning Town, South Woodford, and Hornchurch. They confirmed that the transactions had been going on for several years, and almost all of them had flagged suspicions with the Post Office’s investigators. However, they said Lyca had explained when questioned that the money was coming from shop sales of its calling cards. Santander had imposed limits on the amounts Lyca was allowed to deposit at each branch, they said, and the cash drops were allowed to continue. The tellers said they remained deeply uncomfortable about accepting such large volumes of cash, not least because it was difficult, time consuming, and risky to handle and count so much money.

Most of the nine staff members we spoke to said no other business customers paid in sums anything close to what the couriers regularly deposit. Most said the highest amounts any corporate customer ever brought in were around £10,000. The highest transaction anyone said they had seen, apart from the deposits by Lyca, was £26,000.

If Post Office tellers have concerns about a financial transaction they are being asked to make, they are duty-bound to flag their suspicions to their internal investigations team. The investigators then decide whether to file a formal suspicious activity report (SAR) to the National Crime Agency.

The Post Office declined to answer whether any of the suspicions about Lyca raised internally by their tellers had been referred to the NCA, but said it always passes on any concerns when appropriate. It said in a statement that it could not comment on Lyca’s cash deposits because it treats customer information with “the utmost sensitivity and confidentiality” and because “to disclose details of cash transactions ... would jeopardise the security of our staff”. However, it stressed that: “We take our obligation to comply with Anti Money Laundering regulations very seriously and are fully compliant." The statement said the Post Office would "wholly reject any inference to the contrary".

BuzzFeed News

BuzzFeed News is protecting the identities of the Post Office staff who spoke to our reporters. One teller who dealt with the couriers at Bow Post Office said the Lyca bagmen would bring £120,000 a week in bundles of £20, £10, and £5 notes. “We actually complained about these things because we couldn’t handle it,” the teller said, explaining that staff had to lay the cash out over the floor of their office in order to count it. “I think people have been getting pissed off and fed up with these things because I have to spend over an hour to bag those things up, and we have to check [the money count] three times.”

The teller said the branch had tried refusing to accept the cash, but the couriers had produced a letter from Santander authorising deposits of £120,000 a week into the Lyca account. The Post Office’s own cash collection drivers had told staff that the couriers were depositing similar sums all over London. After hearing that, the teller had told the couriers to take their money to another, bigger branch and refused to accept any more of their cash.

A teller at Canning Town Post Office told BuzzFeed News that the couriers used to haul in a “huge amount” of money that could be more than £200,000 at a time, but the sums they were allowed to deposit had been capped 18 months ago around £100,000 after the branch had repeatedly flagged suspicions. The teller also said the couriers had offered staff free mobile phones and SIM cards, but that they had been turned down because it would be against the rules to accept any gifts.

Two staff members at Hornchurch Post Office said the couriers had been visiting for years with bags of cash. They said the couriers did not like them to unpack the money at the counter, as they usually would, but insisted that they take the rucksack into a backroom to count it away from public view.

One of the Hornchurch tellers called the huge cash deposits “suspicious” and said “three different managers” had flagged the cash transactions to the Post Office’s investigators. But even after the amount Lyca could deposit had been capped at £240,000, the tellers said, the company’s couriers had continued trying to exceed it by as much as £50,000 a week: “They think we’re silly. We’ve got rules; we stick by them.”

How Lyca’s bagmen ferried rucksacks full of cash all over London.

BuzzFeed News

BuzzFeed News spent five months investigating how a cash crew deployed by the Lycamobile telecoms group deposited bags of cash stuffed with hundreds of thousands of pounds in Post Offices across London. Here's the inside story of their money trail.

1. These three men are Lyca’s trusted cash couriers.

BuzzFeed News

2. They work at the company’s depot on a lonely industrial estate in Beckton, east London.

BuzzFeed News

View Entire List ›

This is how the firm that deposits up to £1 million a week at the Post Office in rucksacks full of cash bought its way into the Tory elite.

Supplied

The Tory donor Lycamobile is embroiled in controversy after BuzzFeed News exposed its practise of dropping hundreds of thousands of pounds in cash-stuffed rucksacks at multiple Post Office branches twice a day. The firm has said it is a cash-rich business and that deposits at the Post Office are entirely above board and nothing more than "day to day banking." But experts said they were "deeply suspicious" and called for an urgent investigation. Here's everything you need to know about how the tax-avoiding telecoms giant wooed the Conservative party.

Subaskaran Allirajah, the Lycamobile owner, is one of the Conservative party’s most generous benefactors.

The Sri Lankan-born telecoms boss has handed David Cameron’s party more than £1.3 million since 2011 through Lycamobile UK, which avoids tax by moving revenues offshore.

i-images

View Entire List ›

Getty / Reuters / i-images / Thinkstock / Lynzy Billing / BuzzFeed

This is Part Two of a BuzzFeed News Investigation.

Part One: This Tory Donor Was Secretly Filmed Dropping Cash-Stuffed Rucksacks At Post Offices.

Part Three: Tory Donor Reported To Cops For “Money Laundering” After Rival Spied On Cash Drops.

The offshore empire of the Lycamobile tycoon Subaskaran Allirajah is facing investigation as part of a sprawling international probe into allegations that billions of dollars were stolen from Sri Lanka by associates of the country’s former president Mahinda Rajapaksa.

BuzzFeed News has uncovered secret details of a deal being scrutinised by the Sri Lankan authorities in which the state telecoms company was effectively forced to pump around $10 million into a “completely flawed” venture owned jointly by a relative of Rajapaksa and a key offshore company in the Lycamobile business network.

Senior government and police officials in Colombo, Sri Lanka, told BuzzFeed News that the newly inaugurated financial crimes division of the Sri Lankan police is launching a probe into the venture, Sky Network, which they suspect was a “shell company” that the president’s nephew used to enrich himself through a “shady transaction”.

Allirajah has strongly denied allegations about his association with the autocrat, who is accused of rampant corruption and human rights atrocities during his decade in power. He insisted last year that he had no business in Sri Lanka and had never met Rajapaksa or dealt with his relatives. But now BuzzFeed News has obtained conclusive evidence – from corporate documents, insiders, and government officials – that his empire did business with the Rajapaksa family. Company filings in Colombo show that Sky Network was 95% owned by a key arm of Lycamobile's corporate web and the former president’s nephew, who sat on the board alongside the telecoms giant's then chief executive.

The revelations will pile further pressure on David Cameron to sever his ties with Allirajah, whose company has donated more than £1.3 million to the Tories. The party has previously brushed off explicit warnings about the donor’s links to the Rajapaksa family and continued accepting gifts running to more than £500,000 in this year alone.

David Cameron visited Colombo to meet Rajapaksa in 2013 at the same time as Prince Charles following the Commonwealth Business Forum sponsored by Lycamobile. Last year, a photo emerged of Allirajah apparently disembarking a military helicopter, but he denied it was provided by the regime and said he had rented it.

Getty / Reuters / Supplied

The prime minister is already facing calls to hand back the money after BuzzFeed News yesterday revealed secret footage of three Lyca bagmen depositing rucksacks stuffed with hundreds of thousands of pounds in cash at Post Offices all over London. The company said it was a cash-rich business and that the deposits were just above-board “day to day banking” but experts including the former director of public prosecutions Lord MacDonald said they were “deeply suspicious” and called for an urgent investigation.

There is no evidence to suggest that the corruption claims in Colombo are connected to the company’s unusual cash deposits in London, but they raise further serious questions about the way the Lyca group conducts its business. The firm, which declared £1.1 billion in global turnover last year and is rapidly expanding in the United States, has avoided UK corporation tax for years by moving revenues out of the country through a complex offshore network. Some of that money ends up in Hastings Trading e Serviços Lda – the Madeira company that acquired 95% of Sky Network, with the president’s nephew retaining the other 5%.

BuzzFeed News interviewed two former executives at Sri Lanka Telecom (SLT) who said the majority state-owned firm was all but forced to pour millions of dollars into Sky Network and got nothing in return. A senior detective in the Sri Lankan police force said it had “started the legal process of investigation” into the deal, and the country’s deputy foreign minister confirmed that the new probe was part of the wider international hunt for assets allegedly stolen during Rajapaksa’s decade of kleptocracy.

Speaking animatedly about a container of gold he believed Rajapaksa’s family had hidden under the sea, cabinet spokesman Rajitha Senaratne sat in an office that epitomised the challenge of a developing nation trying to find and retrieve precious assets now dispersed around the world. Cream-coloured paint peeled off the walls of the government building. There was no air conditioning, only fans which needed restarting every so often. A torn sign Sellotaped to the unmanned reception desk warned: "Please do not put weight on..." The car park was riddled with potholes full of monsoon rain.

Searching for Sri Lanka’s embezzled billions is a daunting task for the new regime, which came to power when Rajapaksa was finally ousted by voters in January this year, especially because it presides over a country still emerging from decades of civil war. Senaratne told BuzzFeed News that investigators believe the Rajapaksa family has gone to extraordinary lengths to hide stolen assets from the state. “They took about 11 containers of cash and gold from the presidential palace,” he said. “We understand they have sealed the containers and taken some underground, and they have dropped one in the sea – we do not know the exact site but we know the area.”

In total, the new government estimates the former president and his cronies have hidden at least $10 billion through a web of offshore accounts, various associates, and business ventures around the world. They believe $5.31 billion was taken out of Sri Lanka in 2013 alone. And they are determined to find the money and bring it home.

Rajapaksa and his wife (right) received state visits from the Prince of Wales and Duchess of Cornwall during his decade in power. The official feed from Clarence House is one of the few accounts he follows on Twitter – along with that of Lord Sugar's business adviser on The Apprentice, Nick Hewer.

Getty / Reuters

Rajapaksa was both feared and revered during his decade in the presidential palace. Many on the island nation of 20 million consider him a hero for finally crushing the 26-year armed rebellion by the separatist Tamil Tigers. But his forces committed war crimes including rape, torture, bombing hospitals, and killing tens of thousands of civilians, according to the United Nations. He presided over a nepotistic circle that controlled, by some estimates, as much as 70% of the government’s budget and five of the largest ministries.

Rajapaksa has consistently denied any wrongdoing. But since January, when he lost the presidency to his former ally Maithripala Sirisena, the new Sri Lankan government’s wide-ranging corruption investigation has circled around the former president, arresting one of his brothers, summoning another to appear before the Bribery Commission, and questioning his wife.

The UK Serious Fraud Office has been providing training to Sri Lankan investigators, and the World Bank and International Monetary Fund are helping to coordinate the hunt for looted assets across the globe, including in the Seychelles, Dubai, India, the US, and Europe.

The task ahead is gargantuan, but Senaratne said there had been some early successes: For example, he said, investigators found more than $1 billion hidden in a Dubai bank account belonging to Rajapaksa’s nephew Himal Hettiarachchi. It is the same nephew whom the company in Allirajah’s Lyca empire joined forces with in the telecoms deal that is now under scrutiny.

The civil war was still raging when Greg Young took the helm of Sri Lanka Telecom as chief executive in February 2009. His first year, he recalled, was “miserable”. The energetic Australian executive had been parachuted into his new position by Malaysian shareholders who wanted him to get to grips with lax business practices at the company, but he said he soon found that insiders tried to block his moves at every turn. SLT had entered into a variety of deals before Young arrived that he said struck him as bizarre. One of those involved a company called Sky Network.

Young discovered that SLT had poured millions of dollars into a joint venture with Sky Network, a company that at that point had no income and was valued at a mere 20 rupees – less than £1. SLT had joined the ill-fated venture to access high-speed data frequencies that would later become obsolete just before Young arrived at SLT. The new executive was baffled by the move and began sniffing around. Eventually, he pieced together what had happened – and his account is supported by internal corporate documents, a second former high-ranking executive with deep knowledge of the Sky Network deal who requested anonymity, and the country's deputy foreign minister.

Sky Network was set up in 2006 and registered to the home address of Rajapaksa’s nephew on Old Kottawa Road, a narrow street in Colombo where the odd palm tree can be glimpsed through the clouds of dirt kicked up by dozens of rickshaws and cars. The company lay dormant for a year, until April 2007, when Hettiarachchi listed himself as a director; around the same time, 95% of its shares were acquired by Hasting Trading e Serviços Lda, based in the Portuguese tax haven of Madeira. Hettiarachchi, a software engineer, retained the remaining 5%. What Young didn’t know was that this company was a major outpost of the Lycamobile empire, owned by the telecoms mogul Allirajah.

Hastings controlled Lycamobile's intellectual property and trademarks and is 90.5% owned by Allirajah’s wife, Premantharshini Subaskaran, according to the most recent accounts for Lycamobile UK. The other shareholders are unknown. A few months after it acquired almost all the shares in Sky Network, Lycamobile’s then chief executive, Milind Kangle, took a seat on the Sky Network’s board of directors alongside Hettiarachchi.

With no customers or assets, Sky Network did not have much going for it. But around the same time as the deal with the Lyca offshoot was sealed, the fledgling venture suddenly had a stroke of lucrative luck. In March 2007 the government telecoms regulator awarded it three licenses for access to coveted high-speed data frequencies – licenses the government had repeatedly denied to SLT.

The majority state-owned telecoms firm had long sought access to faster “Wimax” internet frequencies, but all their entreaties were rebuffed by the government regulator. Instead, the one-year-old venture headed by the president’s nephew was given access to the frequencies, putting Sky Network in a gilded position.

In June 2007, the company reached out to SLT. The state telecoms company was welcome to piggyback on Sky Network’s new Wimax frequencies, but it would have to pay an eye-watering price. Young and the other company executive said SLT was being held over a barrel: to get access to the high-speed frequencies it felt it desperately needed to compete in the market, it had to do business with the president’s nephew.

Rajapaksa's nephew Himal Hettiarachchi (left) and Lycamobile's then CEO Milind Kangle (middle) were both directors of Sky Network. A leaked SLT memo said Chris Tooley (right), the current CEO of the telecoms giant, was also on the board.

Getty / i-images / Supplied

A memo submitted to the SLT board in June 2007 and leaked to the Sunday Leader noted: “SLT has already applied for the WiMax frequency from the Telecommunication Regulatory Commission of Sri Lanka (TRCSL) but despite repeated reminders there has still been no progress to obtain these frequencies … Lyca Group in UK which is a virtual operator in UK has approached SLT for business through its 95% owned subsidiary, Sky Network, which has been given WiMax frequency to operate islandwide.” The memo listed another Lyca executive, its current CEO, Chris Tooley, as a board member of Sky Network, along with the then CEO Milind Kangle and Rajapaksa’s nephew Hettiarachchi. It isn’t known how involved Kangle and Tooley were in the day-to-day running of Sky Network or its deal with SLT.

By early 2008, SLT had agreed to what Young blasted as a “completely flawed” joint venture with Sky Network to offer high-speed broadband services, similar to 4G, to customers. SLT would put up 70% of the costs but would only get a 40% cut of the profits. The remaining 60% would be retained by Lyca’s Madeira company and Rajapaksa’s nephew.

SLT poured approximately $10 million into the venture over four years, according to its former CEO Young. Documents seen by BuzzFeed News show how the state telecoms company poured money into developing the Wimax technology while Sky Network was supposed to bring in the customers. But when Young took over the company, he found that Sky Network was “never able to successfully capture a customer.”

The venture had run into the sand, the Australian said, and the high-speed technology at the heart of the deal was already becoming obsolete. “It was a failed concept,” said Young. “We basically brought a halt to everything.” After an impairment test ordered by the company’s auditor determined that there was no prospect of Sky Network generating any income in the foreseeable future, SLT was told it had to take a write-off on the deal.

Young said he could see no good business reason for SLT having bought into Sky Network: “It was a company that effectively had no assets, had no operations, and had no value – so effectively SLT bought something, paid for it, and it had no value.”

But it had value to Rajapaksa’s nephew Hettiarachchi, who “was given an office, a car, a driver, an expense allowance, and a very generous salary”, said Young. He said Hettiarachchi was paid around $5,000 a month yet had almost nothing to do with the running of the business, turning up to board meetings only once every couple of months. “So we were just forking out of SLT to actually pay his salary and costs, because [Sky Network] wasn’t generating any income.”

Young told BuzzFeed News that the deal was “brokered and presided over” by the SLT chair at the time, Leisha Chandrasena, who was apparently close to Rajapaksa. “It was always reported that she was a classmate of his from law school and she came out of nowhere; no one had heard of her – she was not a prominent lawyer or anything like that,” Young said. “And then one day she was suddenly the chair of the third-largest public business in the country and everyone is asking the question about what was her qualification or credentials to chair a large company. She always alleged that she was close to the president, and certainly there was a lot of evidence of that.” SLT's former CFO confirmed Young's account that Chandrasena was "very close to the ex-president".

Lynzy Billing

This is Part Three of a BuzzFeed News Investigation.

Part One: This Tory Donor Was Secretly Filmed Dropping Cash-Stuffed Rucksacks At Post Offices.

Part Two: Lycamobile’s Offshore Empire Is Embroiled In Sri Lanka’s Hunt For Stolen Assets.

Suspicious six-figure Post Office cash drops by the Lycamobile group were reported to the police as "prima facie evidence of money laundering" a year ago by the telecoms giant's biggest commercial rival, BuzzFeed News can reveal.

Lebara, a major competitor in the market for prepaid calling cards used by Europe's migrant communities, deployed a team of corporate spies to tail Lyca's bagmen all over London and reported their unorthodox cash movements to the National Crime Agency (NCA).

A major investigation by BuzzFeed News revealed this week that Lyca deploys three men to drive around in unmarked people carriers depositing rucksacks stuffed with hundreds of thousands of pounds twice a day across London. The Conservatives have accepted £1.3m from Lycamobile, and Labour MPs have demanded that the party put a freeze on any further donations from the telecoms giant and consider handing back its money.

The former director of public prosecutions Lord MacDonald QC said the cash desposits caught on film by BuzzFeed News were "deeply suspicious" and demanded an urgent investigation.

Lebara has now confirmed that it orchestrated its own wide-ranging campaign of espionage from May to September last year and passed its findings to the authorities. The operation was commissioned by the prominent law firm Mishcon de Reya, which acknowledged in a letter: "We did, on behalf of our client, engage the services of a private investigator firm to investigate in a lawful and proper manner alleged improper business dealings by Lyca.

"In the course of their investigation the investigators found prima facie evidence of money laundering which they then followed up ... After obtaining criminal legal advice, our client passed the results of the investigation to the appropriate authorities." The NCA refused to comment on what action, if any, it had taken as a result or whether the evidence had been passed to any other government agency.

Lebara insisted that its investigation was geared to probe "alleged improper business dealings by Lyca" and not to obtain commercial secrets.

BuzzFeed News has seen documents, photographs, and footage that reveal how the surveillance targeted Lycamobile chair Subaskaran Allirajah and other bosses including the firm's chief executive, Chris Tooley.

A team of private detectives – many of them former Scotland Yard detectives or government intelligence officers – also dug dirt on Lyca’s finances and political connections. They pored over its donations to the Conservative party, now totalling £1.3 million, and its links to the controversial regime of a former Sri Lankan president accused of rampant corruption and war crimes.

They examined its financial accounts and noted that the company had avoided corporation tax for years by flowing money offshore through a complex network of companies.

But the most explosive of all their findings was the discovery that three cash couriers working at Lyca’s east London depot were ferrying rucksacks stuffed full of around £250,000 a day to Post Offices across London.

Lebara's secret spying campaign illuminates the bitter battle for a growing and increasingly lucrative corner of the telecoms market. But it also shows how bizarre Lyca's practices seemed to a rival in exactly the same line of business. Lyca has said that its huge, scattered cash deposits are perfectly ordinary "day-to-day banking" – but Lebara was so surprised by what it saw on the footage gathered by its spies that its lawyers formed the conclusion its rival could be engaged in money laundering.

The investigation stalled last autumn because, sources say, Lebara got cold feet about its role and did not want it to become public knowledge that it had spied on its rival. The surveillance footage and reports produced by its investigators gathered dust for a year.

However, in May a source with knowledge of Lyca’s business practices approached BuzzFeed News with claims about unusual cash movements at its depot. Our reporters spent the next five months investigating the tip and conducted our own surveillance that showed the bagmen were pumping up to £1 million a week into the company’s Santander bank accounts through Post Office deposits. We also discovered that Lycamobile’s offshore empire is facing investigation as part of an international probe into billions of dollars of state assets allegedly looted by a former Sri Lankan president. Those revelations, published this week, came as no surprise to Lebara, which was sitting on its own incendiary evidence. Today we spill the secrets of its campaign of espionage.

Allirajah's Rolls-Royce was followed to Highclere Castle, where the Conservative party frequently holds fundraising events.

The black Rolls-Royce Phantom purred up the gravel drive toward Highclere Castle, where stewards were waiting to help Subaskaran Allirajah and his guests alight for a black-tie gala evening.

The aristocratic estate in Hampshire is famous as the setting for the television drama Downton Abbey. However, the rags-to-riches telecoms tycoon was oblivious to his own starring role in a modern-day spy thriller in which undercover agents were secretly filming his every move.

Surveillance specialists had put a tail on the Lycamobile chair’s chauffeur-driven car for a client – Lebara – whose identity was intended to remain a closely guarded secret.

Lycamobile and Lebara are the crowning achievements of two entrepreneurial Sri Lankan refugees who escaped their country’s civil war at a young age. Allirajah, now 43, went to France, a nationality he adopted, before moving to the UK as a young man with an interest in the emerging mobile telecommunications business. Ratheesan Yoganathan, now 39 and the chair of Lebara, fled to India and then to England, where he completed a degree in aeronautical engineering before going to work for Allirajah.

In 2001, he left his mentor with two other Tamil employees to set up a rival telecoms firm, initially in the Netherlands and then in the UK. Some insiders speculate that this may be the cause of bad blood between the two men. Lyca is the dominant force in the UK prepaid calling card market, with Lebara snapping at its heels. Both companies are also rivals in the low-cost money transfer market, which migrant workers in Europe use to remit their earnings to relatives in Asia, Africa, and the Middle East.

Both firms have carefully crafted socially responsible reputations by funding charitable foundations for underprivileged children and sponsorship deals in the worlds of sport and entertainment. Lebara lends support to a leading black music awards ceremony, while Lyca sponsors West Ham United football club.

Lebara said it hired agents to spy on its rival after hearing allegations of impropriety against Lyca. But one source close to the niche firm of former Scotland Yard surveillance specialists who did the work said the mission was to find dirt that Lebara could use to gain a commercial advantage over its rival. “The briefing was that Lebara was looking to take Lyca’s franchises,” said a well-placed source, referring to the shops where the firms sell their prepaid calling cards and SIMs.

Whatever the true motives, Lebara brought in Mishcon de Reya to act as a middleman between the company and its investigators. Last May, the law firm assembled a team of eight operatives to tail Allirajah in cars and on motorbikes from his house on millionaire’s row in Chigwell, Essex. The £2 million gated family house is separated by just one mile and a golf course from where his rival Yoganathan lives in similar suburban luxury.

Allirajah (left) and his former protégé turned business rival Yoganathan.

Allirajah was followed and his movements were logged and reported back. However, according to an insider, the focus of the surveillance suddenly switched shortly after the gala evening at Highclere Castle on 29 May.

The undercover team’s new target was a Lyca depot on an industrial estate in Beckton, east London. Their job was to observe the comings and goings at the warehouse where Lyca stores its prepaid calling cards and – the spies would soon discover – vast amounts of cash.

Days of watching and logging developments passed before the surveillance team identified a pattern of behaviour. A group of Sri Lankan men would arrive in their own cars and leave together in a Ford Galaxy people carrier carrying a bulging rucksack or wheeling a suitcase.

The vehicle was followed as the men visited a variety of Post Offices, some as far as 17 miles from the depot. Eventually, the surveillance operatives followed the men inside the Post Office branches where they observed that large packages of cash in £20 and £50 notes were being handed over. The undercover operatives estimated that the total value of the cash going over the counter every day was in the region of £250,000. The deposits were recorded in a beige ledger-like hardback book that one courier carried.

Surveillance images of Lyca's bagmen depositing sacks of cash in various Post Office branches in 2014.

Sometimes they were close enough to pick up what the Lyca couriers were saying to each other and the Post Office tellers. According to one log, “the cash couriers are overheard discussing a film being produced and mention the name ‘Alirajah’ [sic]. They joke about how they should make a film about themselves.” The irony was not lost on the surveillance team who were secretly filming.

The operatives expressed surprise at the risk Lyca was taking by transporting so much money in this way and wondered why so many Post Offices in London were being used when 20 other financial institutions within a 1.5-mile radius of the depot were available.

The selection of Post Offices visited on a daily basis “does not reflect the closest, safest or most obvious possible locations to make deposits of money”, one surveillance log recorded. The general consensus of the former Scotland Yard detectives was that what they were seeing was “very suspicious” and they raised the possibility that "the patterns of behaviour are associated with money laundering".

Lyca has said that it runs a cash-rich business and that its deposits are entirely above board. After BuzzFeed News conducted its own surveillance of the bag drops, the company said it was simply doing “day-to-day banking”. It said today that it was “completely unaware” of Lebara’s surveillance activities.

The daily routine of the Lyca cash couriers also included visits to an address in East Ham, where operatives observed what they regarded as “suspicious individuals” coming and going with “rucksacks or white plastic bags”. The log reported that a 52-year-old Afghan male owned the East Ham address and was involved in distributing prepaid calling cards and was also the director of a short-lived money exchange company.

The couriers were later followed to Lyca’s smoked-glass headquarters in London’s Docklands, where a new target was identified.

According to a surveillance log dated 11 June, Christopher Tooley, Lyca’s 50-year-old chief executive, was followed at 2:28pm to Manjal, a Docklands restaurant. Operatives sat at a nearby table eavesdropping and filming the Lyca executive having lunch with two men who they reported were discussing, among other things, the movement of money from Africa.

The spies followed Lyca chief executive Chris Tooley (top left image, on the right) to a business meeting in a restaurant in which he was heard discussing moving money out of Africa.

The surveillance operation also targeted a member of Allirajah’s family. Sakthy Pillainayagam, believed to be the Lyca chair’s brother-in-law, worked at the east London depot in a managerial role. He was secretly filmed with one of the cash couriers and followed to and from his home.

According to well-placed sources, the private investigators believed the daily six-figure cash deposits could not be understood in isolation from the company’s finances. Experts were therefore enlisted to scour the accounts and balance sheets for any evidence that might point to tax evasion or other illicit financial activity.

They also traced Lyca’s enviable political connections to David Cameron and Boris Johnson through its substantial donations to the Conservative party. Allirajah has bought a place in the prime minister's exclusive dining club for top donors and once paid £210,000 at a Tory fundraising gala for a bronze bust of Margaret Thatcher.

The spies were also interested in Allirajah’s connections to former Sri Lankan president Mahinda Rajapaksa, whose 10-year rule, which ended this January, was mired in allegations of corruption, cronyism, and war crimes against the Tamil people. The investigators searched for evidence of any joint investments between the Rajapaksa family and the Lyca group of companies. The reports by the team of eight former intelligence officers and Scotland Yard detectives did not identify any connection between Allirajah and the despot's family. However, BuzzFeed News revealed Tuesday that a "shady" deal between the telecoms giant's offshore empire and Rajapaksa's nephew is facing investigation by Sri Lankan authorities.

In September 2014, the corporate espionage was halted and a decision made to approach to the Post Office with the findings. A well-placed source described how one of the investigators had a “strange meeting” with two senior Post Office compliance officers. The officers had come to the meeting carrying a large file, the investigator reported back, but refused to take away any of the covert footage or discuss the evidence of Lycamobile’s cash deposits in any detail. A Post Office spokesperson refused to comment on the meeting or its outcome, but insisted in a statement that it was fully compliant with all its regulatory obligations and that any suggestion to the contrary would be “unfounded”.

But Lebara had been told that its investigators had "found prima facie evidence of money laundering" and wasn't prepared to let the matter rest. The company sought "criminal legal advice" and then passed the results of the investigation to the National Crime Agency. However, sources say that soon afterward Lebara got cold feet about its involvement becoming public and stepped away.

Then, in May, BuzzFeed News received its own tip about Lyca's strange cash movements and began digging. Reporters began surveilling the company's depot and tailing the bagmen to their network of post offices, as well as scouring the company's accounts and interviewing sources. In the course of our own investigation, BuzzFeed News stumbled upon evidence that Lebara had enlisted corporate gumshoes to perform an almost identical surveillance operation to the one our reporters were undertaking. BuzzFeed News subsequently interviewed sources close to the 2014 spying campaign and saw footage, surveillance logs, and financial reports gathered by the investigators.

Approached at his Essex home earlier this month, Lebara owner Yoganathan made no comment when asked why his company had hired a team of spies to tail the men from Lyca, nor did he answer any other questions. Deluxion Morris, Lebara’s corporate development manager, said: “As a business we do not generally comment on competitor activities, as it is not the company policy.”

But just hours before this article was due to be published, BuzzFeed News received a letter from Mishcon de Reya admitting, finally, that Lebara had conducted the espionage and passed its evidence to the police.

The question now is: What, if anything, did the authorities do about it? When contacted by BuzzFeed News, the NCA did not give a clear answer. It said that, when it receives information which it believes warrants "a response," it may either lead an investigation itself or "support other agencies, coordinate and share information with partners". The statement concluded: "The NCA does not routinely comment on its sharing of information or the existence or status of investigations be they by the NCA or another agency.”

The chairman of Lycamobile, Subaskaran Allirajah

i-images

The Tories have accepted a fresh donation of £217,500 from Lycamobile in defiance of calls on the party to sever its ties with the controversial telecoms group.

The latest Electoral Commission data shows the company donated £117,500 in the last quarter, while its Sri Lankan-born owner Subaskaran Allirajah made a personal gift of £100,000. Lycamobile has now given the Tories more than £1.5 million since David Cameron came to power, despite avoiding paying any corporation tax in the UK for years by moving revenue out of the country through a complex offshore corporate network.

The Tories have faced mounting calls to freeze all donations from Lycamobile after BuzzFeed News revealed its highly unorthodox financial activities in October. The company employs three cash couriers who were caught on film depositing rucksacks stuffed with hundreds of thousands of pounds twice a day in post offices scattered across London.

Lycamobile's bank, Santander, has now launched an internal investigation into whether anti–money-laundering protocols have been breached by the deposits, which were branded "deeply suspicious" by the former director of public prosecutions, Lord MacDonald QC.

“The use of unmarked vehicles, the lack of any security arrangements, the repeated deposits of huge sums of cash to multiple branches of the Post Office, is all conduct that cries out for explanation,” Lord MacDonald said. “Frankly, this is not the way a normal … business deposits its cash. ... It demands serious investigation.”

Government investigators in Sri Lanka are separately probing a key offshore company in the Lyca empire that is suspected of helping deposed president Mahinda Rajapaksa launder millions of dollars stolen from the state.

Labour last night attacked the Tories over the decision to continue taking company's money. "Serious concerns have been raised about the business practices of this company, which must be urgently addressed," said Peter Kyle MP. "The prime minister once said that sunlight was the best disinfectant – with that in mind, he needs to explain exactly what checks have been carried out by the Tories to ensure everything with regard to these donations is above board.”

Jon Ashworth, the shadow minister without portfolio, wrote to Tory party chair Lord Feldman last month demanding that the party sever its ties with Lycamobile, but received no response.

The fresh donations were made on 4 September but the Conservatives only reported the gift to the Electoral Commission on 29 October — weeks after BuzzFeed News revealed the company's suspicious business practices.

BuzzFeed News also revealed that Lycamobile was reported to the police for suspected money laundering after its closest rival hired a team of spies to tail its bagmen as they performed their post office cash drops. However, the National Crime Agency has refused to comment on what action, if any, was taken.

Lycamobile denied any wrongdoing and insisted its cash deposits were just "day-to-day banking".

Read the original BuzzFeed News investigation:

Part One: This Tory Donor Was Secretly Filmed Dropping Cash-Stuffed Rucksacks At Post Offices

Part Two: Lycamobile’s Offshore Empire Is Embroiled In Sri Lanka’s Hunt For Stolen Assets

Part Three: Tory Donor Reported To Cops For “Money Laundering” After Rival Spied On Cash Drops

The inner sanctum of the Bank of England was penetrated by a “powerful criminal network” linked to money laundering, terrorism, and contract killings, according to explosive intelligence that the police and MI5 tried to keep secret.

The details of the covert operation – which uncovered a suspected gangland plot so audacious detectives feared it could “destabilise” the British economy – are revealed for the first time in secret police files seen by BuzzFeed News and interviews with several well-placed sources.

The infiltration was discovered when detectives tapped the mobile phone of a Ferrari-driving businessman suspected of laundering money “on a vast scale” for organised crime gangs and reported hearing him receiving secrets from inside the Bank.

The major national security breach has been kept tightly under wraps by police chiefs and spies at MI5 for more than 16 years, shielding those implicated in the highly embarrassing scandal from public, parliamentary, and judicial scrutiny.

Although police warned senior bankers that a mole was passing inside information to a businessman connected to organised crime, the leaker was never identified, no one was sacked, and the businessman remains at large.

The Bank of England is now facing serious questions about how gangsters gleaned Britain’s most closely guarded financial secrets and how the public can be confident no such breach will occur again.

In 1998, as part of a major probe codenamed Operation Beregon, the detectives reported that they had eavesdropped on a high-rolling young stockmarket speculator receiving highly sensitive information about the bank’s monetary policy committee (MPC).

The committee meets in private each month to set Britain’s base rate of interest, which affects every aspect of the country’s economy, and the confidentiality of its deliberations is sacrosanct. Policymakers are made to sign a “declaration of secrecy” and are subject to “strict purdah rules” before decisions about interest rate changes are announced publicly. It is not suggested that the leak came from a member of the MPC.

But the businessman was believed to be exploiting a sexual relationship with the wife of a Bank of England insider to garner tip-offs about upcoming changes that could be used to gamble on the financial markets.

The threat to national security was deemed so severe that the investigation was swiftly taken over by spies at MI5, and the affair has remained a closely guarded secret for years.

A Bank of England source confirmed that in 1998 it was alerted to sensitive police intelligence that “two people were talking about inside access to the Bank’s information”.

The source said: “Leaking monetary policy stuff would have been, and still is, a hanging offence,” and an immediate internal inquiry was launched. But it failed to identify where the leak was coming from, so no action was taken and the case was closed.

However, some details of Operation Beregon are known to be contained in legal documents filed at the High Court last year by the lawyers of a former senior detective involved in the investigation who is now suing Scotland Yard.

PA / BuzzFeed

The claim also contains other allegations of widespread police and political corruption. Lawyers acting for the Metropolitan police have successfully argued that the whole file should be sealed from public view to protect the safety of its officers and their methodology in fighting organised crime.

The Yard was granted a rare secrecy order by the High Court in October 2014, and although it was rescinded at a hearing on 20 July this year, the file has not yet been made available to the public.

But today BuzzFeed News lifts the lid on a cache of leaked police files and extensive interviews with police sources to give the first full account of Operation Beregon.

The London-based businessman at the centre of the investigation still cannot currently be identified for legal reasons but is referred to in this story as “The Suit”. He denies ever having laundered money or operated as a front for organised crime figures, and says he never received or acted upon inside information from the Bank of England. The allegations, his lawyers said, were “without foundation and appear to have been based on the unlawful disclosure of telephone interception material”.

The Beregon files seen by BuzzFeed News draw upon “a vast amount of intelligence” detailing his suspected links to notorious gang bosses including the north London crime lord Terry Adams. They also reveal The Suit’s suspected involvement in drug trafficking linked to international terrorism. His criminal associates were also suspected of involvement in contract killings in Britain and abroad.

The files also document the tapping of his mobile phone that allowed detectives to listen in on his calls with a coterie of lovers across London. One of them, sources say, was believed to be the wife of the Bank of England insider.

A source with knowledge of the operation said: “Organised crime’s infiltration of the City of London and financial services industry has long been a concern. Intelligence such as this was a real risk to the economic well-being of the UK and shouldn't have been suppressed.”

PA / BuzzFeed

In January 1998, an intense intelligence-gathering operation with three targets was taken over from Scotland Yard by detectives from the newly formed National Crime Squad.

Police files show that two 51-year-old east London gangsters and The Suit, in his early thirties, were suspected of being “the heads of an organised and powerful criminal network”. Internal documents described Operation Beregon as “a pro-active investigation … into the activities of criminals of the highest echelon”.

The targets were, the report said, “not only involved with numerous criminal gangs within the United Kingdom but also four separatist terrorist groups across the world and criminal organisations including the ‘mafia’ and the most powerful Dutch criminal organisations”.

Target 1 was identified as "The Head” of the trio and Target 2 was deemed “The Criminal Mind”. The pair were known to the police as career villains with convictions going back many years and were suspected of involvement in the supply of drugs and firearms to “criminals and terrorists”, including “8 shipments of machine guns, grenades and semtex” to the Provisional IRA, as well as having been linked to gangland assassinations.

The Suit, meanwhile, was believed to be “the organisation’s front” in the straight world of business and finance. Detectives noted: “He launders money on a vast scale.”

Detectives at Operation Bergon linked The Suit to a range of expensive cars including a red Ferrari, a black Porsche, a silver Mercedes, an Aston Martin, and a Bentley Azure. His lawyers told BuzzFeed News that he “likes luxury cars” and had owned these vehicles.

Detectives also found that The Suit owned “a number of properties in and around the west end of London and Essex area [and] a number of girlfriends at various premises”.

This was a man of the most expensive tastes, but although he had directorships in a variety of telecoms companies, his extravagant spending vastly exceeded any legitimate earnings — leading detectives to believe he was living the high life on dirty money.

The detectives noted that The Suit sometimes lived in Dubai and was believed to have links with Iran, and that he had been a “ghost” in the tax system for many years until reaching a settlement with the Inland Revenue just before Operation Beregon began.

An intelligence report noted: “He appears to be the weak link leading to an opulent lifestyle with no apparent means or income.”

He was strongly suspected of laundering the dirty millions being raked in by his criminal associates, and the detectives wanted to follow the money. In February 1998, they applied for permission to tap his phone. Soon Operation Beregon was eavesdropping on The Suit’s conversations with lovers, businessmen, and criminal conspirators.

Surveillance photographs of The Suit (top right) meeting the notorious gangster Terry Adams (top left) and his associates in London.

Supplied / BuzzFeed

One intriguing name that cropped up repeatedly was someone The Suit referred to as “Uncle”. Detectives would later establish that this was code for Terry Adams, the head of north London’s most feared organised crime gang. The Adams family, or “A-Team”, had become Britain’s foremost criminal organisation by the late 1990s, suspected of major drug trafficking, fraud, and several unsolved gangland executions.

Terry Adams and his two brothers, Patrick and Tommy, needed “enablers” – professional front people in the “straight” worlds of finance, law, and property – to launder their dirty cash and distance them from their assets.

Police documents show that the Adams brothers typically cleaned their criminal proceeds through the arms-length ownership of properties, clubs, and bars in Islington and the West End, where cash is king. Other criminals would come to them for permission to do business on their patch in return for a cut, and the Adams name was also a franchise to be leased to those with a good scam. A senior police source who investigated the family likened the set-up to “a conveyor belt of criminal opportunities” from which they took “a corner”.

Solly Nahome was the family’s chief money launderer. He operated from a jeweller’s and a front company called Pussy Galore in Hatton Garden where he “koshered up” millions of pounds in dirty money by making legitimate investments for the family.

The police suspected that The Suit’s knowledge and contacts in the booming financial markets offered Terry Adams a different entrée into the City. Then, in November 1998, Nahome was assassinated on his north London doorstep, and The Suit appeared to be in pole position to take his place as chief launderer to the Adams family.

The Suit’s lawyers told BuzzFeed News that he had “never had any personal relationship or business dealings with Terry Adams”, but later acknowledged that he had met the crime boss on three occasions and knew Nahome “through his shop in Hatton Garden at which [he] bought and sold watches and jewellery”.

In the wake of Nahome’s assasination, detectives at Operation Beregon were desperate for intelligence on who would strike such a key associate of the Adams brothers. Permission was granted to bug a business premises in Essex on the grounds that it would provide good intelligence on what was happening inside the crime family and possible leads on the murder.

The listening device produced a wealth of intelligence about drug trafficking and people smuggling. Detectives reported that the Suit and two suspected kingpins were secretly recorded discussing how British organised crime was structured and regularly met to “carve up” the criminal landscape in joint ventures just as Italian mafia families had done in the United States.

At the same time, the detectives continued listening intently to the private calls of the man they believed was poised to replace Nahome as the money man for Britain’s most dangerous organised crime network.

PA / BuzzFeed

The officers at Operation Beregon were stunned when the bugged phone calls between The Suit and one of his lovers began to reveal that this suspected gangland frontman had parlayed his way into London’s most revered financial institution.

According to well-placed official sources from inside the investigation, The Suit was recorded sweet-talking a lover who had close knowledge of the Bank of England and the deliberations of its most secretive committee.

The detectives gleaned from the calls that the woman The Suit was pumping for information was the wife of a Bank insider.

“He was talking to [her] always at the time the monetary policy committee was sitting,” one source said. “They would discuss whether interest rates were going to rise or fall.”

The MPC had only just been set up in 1997 in a landmark move by the new chancellor, Gordon Brown, to make the Bank of England independent of the government in setting interest rates.

It was comprised of eight members including the then governor Eddie George and his future replacement, Sir Mervyn King, along with a selection of the country’s most eminent economists, and its meetings were governed by the strictest code of secrecy.

Interest rates are the government’s key tool in controlling inflation, and at the time of Operation Beregon they were fluctuating as the new committee grappled with the rising cost of living. The base rate had climbed from 6% in early 1997 to 7.5% by mid-1998, and was followed by a dip to 5% a year later.

In a booming stock market, a savvy speculator armed with inside knowledge of what the MPC was about to do could cash in by betting on movements in financial indexes or buying future share options. At the time there was a longer period between decisions about interest rates being made and the public announcement than there is today.

The Suit’s lawyers said he had “never received such information, let alone acted upon it. Further, he has never had a sexual relationship with the wife or partner of any Bank of England insider.”

The apparent compromise of the MPC alarmed detectives because The Suit was suspected of fronting for some of London’s most dangerous criminals, as well as being linked to international mafia groups and terrorist organisations.

The threat to national security was considered so severe that the detectives urgently referred their intelligence to Britain’s spymasters.

Senior intelligence officers from MI5 and other agencies were given a detailed presentation on Operation Beregon in a meeting room at Spring Gardens, the anonymous building in Vauxhall from where the phone taps were controlled.

In a PowerPoint presentation seen by BuzzFeed News, the spies were briefed about the two older men in the trio and their suspected links to other organised crime syndicates in Holland and the UK. The Suit was described as a “money launderer [with] international connections”. All three men were linked during the briefing to “terrorist groups” involved in drug trafficking and a plot to smuggle immigrants.

Sources say the compromise of the MPC was discussed in detail. In a section of the presentation marked “Confidential: extremely sensitive information”, detectives warned that the criminal network had access to “financial inside information” with “political implications” and warned that there was a risk of “destabilisation of [the] UK economy” from “dirty money within the banking structure”.

PA / BuzzFeed

The spies took control of the tap on The Suit’s mobile phone almost immediately. “MI5 put people in the middle,” said a source. “The spooks would not tell the police what they did with the information.”

However, sources said word got back to detectives that MI5 had quietly approached The Suit. He denies this.

But details of how organised crime was believed to have penetrated the secrets of the Bank of England were kept hidden.

A tape of the discussions between The Suit and the head of the trio about how Britain’s most notorious gangs acted as a criminal cartel was passed by the detectives at Operation Beregon to a senior Met officer. But sources say police chiefs still refused to accept that the country’s organised crime groups were anything but loosely affiliated.

When approached this week by BuzzFeed News, The Suit’s lawyers said that the two older targets of Operation Beregon were “the landlords of a property rented by one of [his] businesses from about 1996 to 2008” but that “he has no other connection with them”. They said he “was not aware of any allegation that either of them was involved in crime” and “has had no contact with them for many years".

Operation Beregon closed down shortly after MI5’s intervention without making any arrests, although Terry Adams pleaded guilty to money laundering and was sentenced to seven years in prison in 2007 after a joint police and MI5 operation.

But now the former detective chief inspector who helped run Operation Beregon is suing Scotland Yard in a case that threatens to blow open the secrets of the Met’s covert operations into organised crime.

The claim brought by former DCI David McKelvey and his former colleague DC Darren Guntrip alleges that the force failed to protect them during a difficult organised crime operation and that evidence of political and police corruption was repeatedly covered up or ignored.

Police lawyers sought to prevent publication of the contents of the legal claim during a private hearing in front of Master Barbara Fontaine at the High Court nine months ago.

She granted the secrecy order at the same time as the Met faced criticism in parliament from MPs over its mistreatment of police whistleblowers.

The Met said it was seeking to protect the officers’ safety and its methodology against organised crime by keeping the legal documents secret. But the claimants suspect the intention was to protect the force from criticism over its alleged failure to tackle “systemic” corruption.

The secrecy order was rescinded on 20 July during a pre-trial hearing, paving the way for the file to be unsealed within days.

After being contacted by BuzzFeed News yesterday, Bank officials began a frantic search of its paper archives, while lawyers were dispatched to the High Court to seek access to references to Beregon in the case file. They are also seeking access to transcripts of The Suit’s bugged phone calls.

After examining personnel records, a spokesperson for the Bank confirmed that no leaker had been identified, disciplined, or sacked.

“The Bank of England was approached regarding a potential issue by the police at the time," he said. "The Bank followed up and nothing was found to substantiate the claims of a leak.

“Any member of the Bank’s staff signs the Bank’s Declaration of Secrecy … There are also strict purdah rules about policymakers speaking on or off the record in the days before a monetary policy decision. MPC decisions have always been tightly held … The Bank has the means to watch out for any surprise or premature market moves before a key policy decision is announced.”

The Met said it was “not prepared to comment on highly selective elements from a complicated and long running case outside of the court process” but that it would “continue to defend the claim”.

The National Crime Agency, whose forerunner the National Crime Squad ran Operation Beregon, declined to comment.

A trusted royal guard spills the secrets of a decade of misbehaviour inside Buckingham Palace. “The Queen,” he says, “is going to be mightily pissed off.”

For 10 years Paul Page was a trusted officer in the Metropolitan police's royalty protection command, which guards the Queen and other royals – but he was also secretly running an elaborate Ponzi scheme from inside Buckingham Palace to fund a lifestyle of hard drinking and degenerate gambling. In a new book, For Queen and Currency, Michael Gillard has revealed the full story of Page's decade of misbehaviour. Here are 15 of his craziest confessions about the antics of a wild cabal within the Queen's guards.

1. The guards would turn up to work drunk and disorderly – with disastrous consequences.

Rebecca Hendin / BuzzFeed

Drinking was a "huge part of the culture" among the Queen's guards, but such was the need to have a full relief of armed officers on duty at all times that Page said even those who turned up smelling strongly of booze were allowed to book out weapons and get on with the job. If they were seriously drunk they might be advised to sleep it off in one of the palace rooms, or given medical relief in the form of "a pack of mints and a Lucozade". Page recalled one incident when a senior official in the royal household was coming through the palace gates, and instead of lifting the barrier, a hungover officer accidentally pressed the underground ramp button, sending the woman's car into the air.

Life on the royalty protection command was seen as an easy gig and a nice little earner. Page said that he and some colleagues wangled their police friends off the beat and into the palace by tipping them off about the questions they would be asked at interview. Even without cheating, new recruits would have been hard-pushed to fail the flimsy entry test. Page says they were merely required to identify a mugshot of a prominent royal and answer questions such as, "Is it ever OK to read a book while guarding the gate to the Queen's private quarters?" (Answer: no.)

View Entire List ›

Rex / Getty / Lynzy Billing / BuzzFeed

Scotland Yard faces a major corruption scandal, with police officers under suspicion of taking bribes from security firms working for bars and strip clubs across the West End, BuzzFeed News can reveal.

Sergeant Frank Partridge, dubbed “the Sheriff” of Soho, and Constable Jim Sollars, nicknamed “the Gruffalo” for accepting so many free dinners, have both been arrested for conspiracy to commit misconduct in public office.

Anti-corruption detectives have also swooped on three security bosses at two firms – one of which promotes itself as official partner of the Metropolitan police in delivering London’s key anti-terrorism strategy.

The two arrested officers work in Scotland Yard’s Westminster licensing unit, which holds vast power over the borough’s clubs and bars because it controls their ability to open late, serve alcohol, and play music.

They are suspected of forming corrupt relationships with two security firms, TSS Security and Profile Protection, and are being investigated over allegations that they accepted improper inducements ranging from free dinners, drinks, and club entries to bundles of cash.

In return, the officers face allegations of putting pressure on Soho’s nightspots to use the firms to supply their bouncers and security. Sources say club owners feared that they could lose their licences if they did not comply, and believed that by hiring TSS or Profile they would get protection from police interference at their venues.

TSS Security, which sits on the steering committee of Project Griffin, the Met’s anti-terror initiative, is central London’s biggest door security firm, holding a near monopoly on the hundreds of venues across the West End. Its managing director, Terry Neil, and its head of operations, Douglas Thompson, himself a former Westminster police officer, were arrested on suspicion of being part of the alleged conspiracy. Hassan Serdoud, owner of Profile Protection, which has emerged as the biggest rival to TSS in the past two years, was also arrested.

All five arrested men deny any wrongdoing. They have not been charged and the allegations against them remain unproven while the investigation is ongoing. They are due to answer police bail at the end of the month.

Anti-corruption detectives raided the offices of the Westminster police licensing unit, both firms, and the home addresses of the men they arrested in June this year. They announced the move as the culmination of a “long running intelligence operation led by our anti-corruption command”. But whistleblowers have raised fears that even if the corruption is proved, the true scale of the problem could be swept under the carpet and only junior officers “hung out to dry”.

Security industry insiders aggrieved at having lost lucrative contracts to TSS and Profile say they suspect the alleged corruption may have reached higher echelons of Scotland Yard and that other public officials could also be involved.

The rival security industry boss who initiated the corruption complaint compiled a document for detectives setting out the allegations that has been seen by BuzzFeed News. It claims that improper relationships exist between public officials and security firms in Camden and Croydon as well as Westminster.

“The licensing teams of the above boroughs have created their preferred security company and those companies dominate ... and the rest of us suffer in terms of gaining a market share,” the letter, drafted by Tony Clarke of the rival firm UK Security Facilities, said. “The Licensing Police of Boroughs are very powerful individuals, because they can ruin people’s businesses.”

BuzzFeed News has investigated the biggest alleged police corruption scandal to sweep Soho since the ‘70s and uncovered secret details of the two-year covert operation that culminated in the recent arrests. Extensive interviews with security industry insiders, sources within Westminster council and the Met’s licensing unit, current and former employees of TSS Security, and West End club owners have revealed how a bitter battle for control of Soho’s nightspots has plunged Scotland Yard into crisis.

Left: Jim Sollars, who is said to have lost two stone since his suspension, on his way to the gym in Stansted this week. Right: Frank Partridge strolling outside his Bedfordshire home.

Michael Gillard / BuzzFeed

Sergeant Frank Partridge and Constable Jim Sollars made an odd couple patrolling the streets of Soho under the neon lights of its clubs and bars, but they were as inseparable as they were unmissable.

Partridge, a trim 42-year-old sporting long, thin sideburns, was dwarfed by Sollars, a decade older and a giant of a man at 6’8” and 18 stone. The pair quickly hit it off when Partridge joined the Westminster licensing unit from a senior role in the borough’s gangs division in 2012, and a friend said they were soon spending so much time off-duty eating and drinking on their patch that their partners at home began to joke that they must be having affairs.

The two men were the public face of the licensing unit and spent much of their time out in Soho meeting restaurateurs, nightclub owners, and bar managers with issues about their late-night drink and music licences.

Soho has been a den of vice and entertainment since its days as the hub of London’s sex industry, and the neighbourhood has more restaurants, clubs, pubs, and bars than almost anywhere else in London. Partridge and Sollars held sway over the lifeblood of those venues: their ability to serve drinks and play music late into the night. If there was any sort of disorder, from a drunken punch-up to a drug overdose, the cops could refer the venue’s licence to the sub-committee at Westminster council for review. Millions of pounds are at stake when a licence comes into jeopardy, so club owners rely heavily on security companies to maintain order.

Sollars has spent all his 35 years in the police working in Soho and central London, and he was already a well-known face in the area in 2009 when he moved to the licensing unit to deal with applications. Friends said he had never wanted to rise up the ranks, cherishing the opportunity his patch provided to indulge a love of haute cuisine and fine wines. The image of his hulking frame eating and drinking his way through Soho’s many establishments for free had earned him the affectionate nickname “the Gruffalo” among some locals. Sollars also loved jazz, according to his friends, and was allowed free entry to Ronnie Scott’s, where he liked to prop up the bar.

Partridge was more ambitious: He told colleagues that he had worked undercover in a vice unit and had also served on the Territorial Support Group, the Met’s public order division. He carried the air of a seasoned street cop who knew how the system worked as he took on his new role as a licensing crime prevention and enforcement sergeant in 2012.

But he was not immune to the allure of the Soho club scene. Like his new partner, insiders say Partridge quickly took to staying out late with new friends he was making in the nocturnal world of nightclubs and security. A well-placed source on the Westminster police licensing unit said Partridge had told him he visited strip clubs on his beat when his shift had ended.

The businesses in the area were naturally keen to make sure they stayed in the officers’ good books, and industry sources claim the two cops were happy to accept the hospitality on offer at the venues they visited.

Scotland Yard’s gifts and hospitality policy says officers must “politely decline” any freebies they are offered, unless doing so would seriously damage working relationships, in which case gifts should where possible be donated to charity. The policy covers “beverages and light refreshment”, “offers of free meals”, “entry to clubs”, and even stationery. But there is a grey area: Officers are allowed to make an exception to attend working lunches and dinners that will benefit the Metropolitan police. They must use their discretion, and the stakes are high: The policy notes that “even a small gift to a sole or key decision maker may fall within the scope of the Bribery Act 2010 if it could be perceived to elicit the improper performance of that function”. All gifts, whether accepted or declined, must be recorded on the Met’s hospitality register.

The licensing police insider told BuzzFeed News that Partridge in particular considered socialising with business owners in Soho a key part of his intelligence-gathering duties. “I think what Frank was doing was having drinks with people. Some he was more friendly with than others,” the source said. “He would give people a drink to find out what was going on, the gossip. If he had proper intelligence he would know how to register people as informants.”

Intelligence-gathering is an important part of the duties of the licensing police, but one security industry insider said the hospitality on offer in London’s biggest entertainment district had become “a great source of indulgence” to Partridge and Sollars.

It wasn’t just the bar and restaurant owners extending the hands of friendship to the two officers. One of the most significant relationships they formed was with Terry Neil, the boss of the dominant local security firm, TSS.

Neil was a former bouncer who ran TSS with his then wife, Soraya. The company was formed in 2001 by Michael Hall, a millionaire property developer and the son-in-law of the actor Michael Caine, but he resigned as a director in 2005, leaving the Neils at the helm. The pair have recently separated but continue to work together. The firm grew rapidly and by 2012, when Partridge arrived at the licensing unit, it was the dominant security company in the borough of Westminster, believed to control up to 80% of the doors in the area.

Terry Neil was considered a smooth operator who drove a Porsche and had a taste for Premier Cru Chablis. His operations manager, Douglas Thompson, was another giant of a man, a former Westminster cop who was said to be reluctantly medically retired because he suffered from bad knees following years as an amateur wrestler.

Neil quickly formed a friendship with the two officers, and they could be found drinking late at night together and enjoying meals at expensive restaurants such as Bocca di Lupo in Soho, where a police friend said they took it in turns to pay. Sometimes they would be joined on nights out by Thompson or Soraya, a glamorous multilinguist from Amsterdam who worked as the firm’s finance director.

By the time Partridge and Sollars were forming their friendship with Neil, concerns were already spreading that the firm had become far too close to the police unit that held sway over the licences of the area’s clubs and bars.

A TSS insider had walked away from the company following an acrimonious commercial dispute several years before, and towards the end of 2013 he approached one of the authors of this article with a series of explosive allegations about the firm. He alleged that Terry Neil had formed inappropriate relationships with police officers within the Westminster licensing unit. The insider said Neil was entertaining groups of officers at strip clubs as far back as 2007 – before Partridge and Sollars arrived on the scene – and inducing them to put pressure on club owners to use his firm to supply their bouncers. The insider recalled: “I’ve been up to one of Terry’s bars where there have been licensing police surrounded by strippers and off their heads.” He later elaborated: “I walked into the Red Rooms and saw this copper with this huge [stripper] on his lap with her tits in his face.”

It was, he said, pointless to report his concerns: “If I went to the police and made a complaint about Terry Neil … we’d have no chance of a fair hearing.” When contacted by BuzzFeed News this month about the anti-corruption investigation into Neil’s relationship with Partridge and Sollars, the former insider said: “I think it’s a lot larger than just the people who have been arrested and I think it goes back a lot longer. I’ve been told that it went ... incredibly high.”

TSS strongly denied all the allegations made by the former insider and said the firm was the “victim” of a smear campaign by people who had “motives to lie”. Soraya Neil, who is not the subject of any criminal complaint, represented the company at an 80-minute meeting with BuzzFeed News at the TSS offices in North Acton last week. Though she repeatedly refused, on legal advice, to comment on the police investigation, she strenuously denied that any bribes had been paid to police officers and insisted that the firm had won so many contracts in Soho because of its excellent customer service. The firm’s website – which boasts of its “exemplary relationships” with the Westminster police – was quickly taken down after the meeting but can still be viewed in Google’s cache of old webpages.

By midway through 2013, rival security firms were starting to become enraged by their suspicions that TSS was using its police connections to take over so many doors in the borough and starving them of business.

The most vocal was Tony Clarke, a former Met detective who left the police in 1986 after five years as a surveillance officer and built a business specialising in undercover operations for pub companies experiencing stock and till theft. He later moved into door security and set up UK Security Facilities, which vied with TSS for lucrative contracts in Westminster and London’s other entertainment hubs.

Clarke said he fears no one and sees himself as a crusader standing up for fair play in the security business and policing – though Neil branded him a “narcissist” and a liar who was jealous of his rival’s success. By mid-2013, Clarke said he had fallen out with the Westminster police licensing unit after hearing from potential clients that Partridge and Sollars were telling club managers to use TSS instead of his own firm. Other security bosses confirmed that they had experienced similar problems.

BuzzFeed News has spoken to four security industry rivals who claim Partridge was applying pressure on club owners to use TSS. Most asked to remain anonymous because they feared their businesses could fall foul of the licensing department if they spoke out.

Tony Clarke

UK Security Facilities

Getty / i-images / Lynzy Billing / Sian Butcher / BuzzFeed

This is Part One of a BuzzFeed News investigation.

Part Two: Lycamobile’s Offshore Empire Is Embroiled In Sri Lanka’s Hunt For Stolen Assets.

Part Three: Tory Donor Reported To Cops For “Money Laundering” After Rival Spied On Cash Drops.

One of the Conservative party’s biggest corporate donors, Lycamobile, is facing serious questions over its finances after three bagmen were secretly filmed dropping off rucksacks stuffed with hundreds of thousands of pounds twice a day at Post Offices across London.

A five-month investigation by BuzzFeed News has revealed that the Lyca telecoms group deploys three men to drive around in an unmarked people carrier depositing bags of money, which have totalled up to £1 million each week. Legal and financial experts said the “deeply suspicious” cash deposits should be urgently investigated.

Lycamobile has donated more than £1.3 million to the Conservative party since David Cameron came to power, including over £500,000 in this year alone, despite avoiding paying any corporation tax for years by moving revenue out of the UK through a complex offshore corporate network.

The evidence of Lyca’s unorthodox Post Office deposits comes in the wake of criticism from its new auditor, KPMG, which unearthed almost £46 million of previously undeclared revenue earlier this year and said the company had failed to properly explain the gap in its finances so it had been impossible to tell whether “adequate accounting records” had been kept.

Internal Tory emails show that the party accepted a large donation from the telecoms giant just days after the party’s compliance department raised concerns about its chaotic accounting in 2012. The gift bought the company’s Sri Lankan-born owner, Subaskaran Allirajah, a place in David Cameron’s private dining club for top donors, and the emails show he promised to advise the party on business and help deliver British Asian votes.

BuzzFeed News can also reveal that authorities in Sri Lanka are launching an investigation into a key offshore company in the Lyca empire as part of an international probe into allegations of corruption by the country’s despotic former president Mahinda Rajapaksa.

There is no evidence of any connection between the corruption allegations in Sri Lanka and the mysterious cash deposits in London. However, the Tories are now facing renewed pressure to sever their ties with the company, having previously brushed off warnings about its links to Rajapaksa, who is accused of presiding over a kleptocracy and multiple crimes against humanity during his decade in power.

Lyca declined to answer detailed questions from BuzzFeed News but said the police were aware of security processes in place at the east London depot where it stores its cash. It said the deposits were "day to day banking," sanctioned by the Post Office. It has previously said that it is a cash-rich business because it collects money from shop owners selling its prepaid international calling cards and SIMs all over London.

However, experts said the company’s unorthodox method of depositing cash at scattered locations should raise a red flag with the anti-money-laundering and tax authorities. Lord MacDonald QC, the former director for public prosecutions, called for an urgent investigation into Lyca’s financial activities after seeing the evidence gathered by BuzzFeed News. “The use of unmarked vehicles, the lack of any security arrangements, the repeated deposits of huge sums of cash to multiple branches of the Post Office, is all conduct that cries out for explanation,” he said. “Frankly, this is not the way a normal ... business deposits its cash. It is deeply suspicious and it demands serious investigation.”

Senior Labour MPs joined calls for an urgent investigation and demanded that the Tories freeze all further donations from Lyca and consider handing back the money they have already accepted. Meg Hillier, the chair of the powerful Commons public accounts committee, said HMRC should launch an inquiry into the company's financial behaviour, and her predecessor, Margaret Hodge, said the revelations were "absolutely shocking".

The bagmen make their drops at Canning Town Post Office in July. Three days after this article was published, Lycamobile asked us to pixelate their faces to protect them from robbers.

BuzzFeed News

The twice-daily rucksack drops to multiple Post Offices are especially bizarre because the security firm G4S was filmed visiting the Lyca depot and collecting as many as 40 sacks of money at a time in an armoured van – the normal way for a cash-rich business to transport its takings. The company declined to explain why it is also sending staff to multiple Post Offices with bags of money every day when it has an armoured and properly audited cash-in-transit service at its disposal. Additionally, the Post Office has its own secure cash collection service, which charges just £220 to pick up £1 million a week and drive it directly to the bank.

The Post Office has not explained why Lyca’s unusual cash transactions have been allowed to continue, citing client confidentiality, but it said in a statement that it was fully compliant with all its regulatory obligations and any suggestion to the contrary would be "unfounded".

However, staff in the branches visited by the couriers told BuzzFeed News they felt uncomfortable taking such enormous sums of cash and had repeatedly flagged the deposits as suspicious but were instructed to continue accepting the money.

BuzzFeed News has confirmed that around 18 months ago Santander Bank reviewed the unlimited amounts the company was previously allowed to deposit because of the large volumes of Lyca's cash flowing through the Post Office into its accounts. It imposed limits of between £100,000 and £240,000 on the money the couriers could drop off at each branch after a series of Post Office tellers raised suspicions.

A senior Santander insider said that the evidence BuzzFeed News had assembled of how Lyca deposits cash was “eye-opening” for the bank. “I think this is something that we’ve identified and are attempting to do our appropriate duty on,” the source said. He also confided: “I suspect this is not the end of this one. I suspect things will progress probably partly due to the work you guys are doing.”

The Lyca group buys surplus international airtime and data from the major telecoms operators wholesale and sells it on cheap prepaid calling cards and SIMs to its 14 million customers – mostly migrants from Asia, Africa, and South America living in Europe – so they can “call the world for less”. Many of its customers pay for its goods in cash, although a Lycamobile insider told BuzzFeed News it sells the majority of its calling cards through large distributors that buy in bulk rather than directly to shop owners. Such distributors would not usually pay telecoms companies in cash but instead use bank transfers or other safe and efficient means.

Allirajah, the company’s founder, is worth £160 million, according to the Sunday Times rich list. The Lyca group reported global sales of £1.1 billion last year, but it has consistently avoided paying UK corporation tax by moving revenue to the tax haven of Madeira through an intricate network of more than 60 companies.

The Tories have faced down heavy criticism for taking money from the firm, which was branded a “tax offender” by Margaret Hodge, then the chair of the Commons public accounts committee, two years ago. Allirajah, who spent £210,000 on a bronze bust of Margaret Thatcher at the party’s exclusive Black and White Ball this year, bought a membership in Cameron’s exclusive leader’s group for top donors.

The party is now facing mounting pressure to sever its ties with the company amid serious concerns about its unorthodox cash movements, chaotic accounting practices, avoidance of tax, and alleged links to a defunct foreign regime mired in corruption claims.

BuzzFeed News began its investigation after being tipped off that cash couriers working at Lyca’s depot at a business park in Beckton were driving to branches of the Post Office and making suspiciously large cash deposits.

In a surveillance operation over five weeks in June and July this year, our reporters watched the men leave the depot in an unmarked black people carrier and followed them to Post Offices scattered across east London. They were secretly filmed handing sums of up to £240,000 over the counter in a red-and-black rucksack. BuzzFeed News established that at least 10 separate Post Office branches have been regularly used to deposit cash by the couriers dating back several years.

The three bagmen had a well-practised routine, but they were sometimes visibly tense and were occasionally seen arguing as they conducted their cash rounds.

They would set off around 9:30am each morning for a Post Office, where two of them would get out on foot to drop off the rucksack and a third would wait at the wheel of the people carrier nearby. Inside the branch, one would sit or stand with his back to the wall scanning the room while the cash was being deposited by the other. The rucksack was shoved through the parcel-drop hatch and taken away to be counted by a member of staff while the couriers waited. They then presented a Santander bank card, which was used to deposit the funds into one of the company’s bank accounts, before retrieving the empty rucksack and returning to the people carrier. They repeated the routine almost every afternoon.

On one occasion in July, a G4S driver in a security helmet and full-body armour was filmed arriving at the depot and loading his van with more than 40 bags of cash over a half-hour period. While the driver was at work, the three bagmen backed out of the yard past him in their unmarked people carrier and were followed to Hornchurch Post Office, where they deposited another bag of cash.

In some cases, Post Office staffers said the Lyca employees had offered cashiers mobile phones and calling cards, which they were forbidden from accepting. One teller was secretly filmed taking what appeared to be phone and a SIM card from one of the men. She could not be reached for interview.

In between the two Post Office drops in the morning and afternoon, the couriers were followed across the city to the offices of AA Com, a distributor of international calling cards above a beauty salon in Norbury, south London. There, they were filmed each day unloading from the boot of the people carrier boxes that were taken into the company’s hallway. Then they loaded an orange trolley with more boxes and, often, heavy bags full of cash from inside the office, which were wheeled along the pavement and transferred into the vehicle.

Staff at AA Com told BuzzFeed News reporters who visited the office that it sells its stock to agents, most of whom pay by bank transfer, but that some of its smaller customers pay in cash, which it either banks or passes to the Lyca couriers when they visit. However, the company declined to answer detailed questions sent in writing about why it so regularly hands over such large volumes of cash in plastic bags to the men from Lyca. There is no suggestion that AA Com is involved in impropriety.

After the surveillance was concluded at the end of July, BuzzFeed News interviewed staff members at six of the Post Offices where the couriers had been followed: Bow, Lea Bridge Road, Walthamstow, Canning Town, South Woodford, and Hornchurch. They confirmed that the transactions had been going on for several years, and almost all of them had flagged suspicions with the Post Office’s investigators. However, they said Lyca had explained when questioned that the money was coming from shop sales of its calling cards. Santander had imposed limits on the amounts Lyca was allowed to deposit at each branch, they said, and the cash drops were allowed to continue. The tellers said they remained deeply uncomfortable about accepting such large volumes of cash, not least because it was difficult, time consuming, and risky to handle and count so much money.

Most of the nine staff members we spoke to said no other business customers paid in sums anything close to what the couriers regularly deposit. Most said the highest amounts any corporate customer ever brought in were around £10,000. The highest transaction anyone said they had seen, apart from the deposits by Lyca, was £26,000.

If Post Office tellers have concerns about a financial transaction they are being asked to make, they are duty-bound to flag their suspicions to their internal investigations team. The investigators then decide whether to file a formal suspicious activity report (SAR) to the National Crime Agency.

The Post Office declined to answer whether any of the suspicions about Lyca raised internally by their tellers had been referred to the NCA, but said it always passes on any concerns when appropriate. It said in a statement that it could not comment on Lyca’s cash deposits because it treats customer information with “the utmost sensitivity and confidentiality” and because “to disclose details of cash transactions ... would jeopardise the security of our staff”. However, it stressed that: “We take our obligation to comply with Anti Money Laundering regulations very seriously and are fully compliant." The statement said the Post Office would "wholly reject any inference to the contrary".

BuzzFeed News

BuzzFeed News is protecting the identities of the Post Office staff who spoke to our reporters. One teller who dealt with the couriers at Bow Post Office said the Lyca bagmen would bring £120,000 a week in bundles of £20, £10, and £5 notes. “We actually complained about these things because we couldn’t handle it,” the teller said, explaining that staff had to lay the cash out over the floor of their office in order to count it. “I think people have been getting pissed off and fed up with these things because I have to spend over an hour to bag those things up, and we have to check [the money count] three times.”

The teller said the branch had tried refusing to accept the cash, but the couriers had produced a letter from Santander authorising deposits of £120,000 a week into the Lyca account. The Post Office’s own cash collection drivers had told staff that the couriers were depositing similar sums all over London. After hearing that, the teller had told the couriers to take their money to another, bigger branch and refused to accept any more of their cash.

A teller at Canning Town Post Office told BuzzFeed News that the couriers used to haul in a “huge amount” of money that could be more than £200,000 at a time, but the sums they were allowed to deposit had been capped 18 months ago around £100,000 after the branch had repeatedly flagged suspicions. The teller also said the couriers had offered staff free mobile phones and SIM cards, but that they had been turned down because it would be against the rules to accept any gifts.

Two staff members at Hornchurch Post Office said the couriers had been visiting for years with bags of cash. They said the couriers did not like them to unpack the money at the counter, as they usually would, but insisted that they take the rucksack into a backroom to count it away from public view.

One of the Hornchurch tellers called the huge cash deposits “suspicious” and said “three different managers” had flagged the cash transactions to the Post Office’s investigators. But even after the amount Lyca could deposit had been capped at £240,000, the tellers said, the company’s couriers had continued trying to exceed it by as much as £50,000 a week: “They think we’re silly. We’ve got rules; we stick by them.”

How Lyca’s bagmen ferried rucksacks full of cash all over London.

BuzzFeed News

BuzzFeed News spent five months investigating how a cash crew deployed by the Lycamobile telecoms group deposited bags of cash stuffed with hundreds of thousands of pounds in Post Offices across London. Here's the inside story of their money trail.

1. These three men are Lyca’s trusted cash couriers.

Three days after this story was published Lycamobile asked us to pixelate the faces of the bagmen to protect them from robbers.

BuzzFeed News

2. They work at the company’s depot on a lonely industrial estate in Beckton, east London.

BuzzFeed News

View Entire List ›

This is how the firm that deposits up to £1 million a week at the Post Office in rucksacks full of cash bought its way into the Tory elite.

Supplied

The Tory donor Lycamobile is embroiled in controversy after BuzzFeed News exposed its practise of dropping hundreds of thousands of pounds in cash-stuffed rucksacks at multiple Post Office branches twice a day. The firm has said it is a cash-rich business and that deposits at the Post Office are entirely above board and nothing more than "day to day banking." But experts said they were "deeply suspicious" and called for an urgent investigation. Here's everything you need to know about how the tax-avoiding telecoms giant wooed the Conservative party.

Subaskaran Allirajah, the Lycamobile owner, is one of the Conservative party’s most generous benefactors.

The Sri Lankan-born telecoms boss has handed David Cameron’s party more than £1.3 million since 2011 through Lycamobile UK, which avoids tax by moving revenues offshore.

i-images

View Entire List ›

Getty / Reuters / i-images / Thinkstock / Lynzy Billing / BuzzFeed

This is Part Two of a BuzzFeed News Investigation.

Part One: This Tory Donor Was Secretly Filmed Dropping Cash-Stuffed Rucksacks At Post Offices.

Part Three: Tory Donor Reported To Cops For “Money Laundering” After Rival Spied On Cash Drops.

The offshore empire of the Lycamobile tycoon Subaskaran Allirajah is facing investigation as part of a sprawling international probe into allegations that billions of dollars were stolen from Sri Lanka by associates of the country’s former president Mahinda Rajapaksa.

BuzzFeed News has uncovered secret details of a deal being scrutinised by the Sri Lankan authorities in which the state telecoms company was effectively forced to pump around $10 million into a “completely flawed” venture owned jointly by a relative of Rajapaksa and a key offshore company in the Lycamobile business network.

Senior government and police officials in Colombo, Sri Lanka, told BuzzFeed News that the newly inaugurated financial crimes division of the Sri Lankan police is launching a probe into the venture, Sky Network, which they suspect was a “shell company” that the president’s nephew used to enrich himself through a “shady transaction”.

Allirajah has strongly denied allegations about his association with the autocrat, who is accused of rampant corruption and human rights atrocities during his decade in power. He insisted last year that he had no business in Sri Lanka and had never met Rajapaksa or dealt with his relatives. But now BuzzFeed News has obtained conclusive evidence – from corporate documents, insiders, and government officials – that his empire did business with the Rajapaksa family. Company filings in Colombo show that Sky Network was 95% owned by a key arm of Lycamobile's corporate web and the former president’s nephew, who sat on the board alongside the telecoms giant's then chief executive.

The revelations will pile further pressure on David Cameron to sever his ties with Allirajah, whose company has donated more than £1.3 million to the Tories. The party has previously brushed off explicit warnings about the donor’s links to the Rajapaksa family and continued accepting gifts running to more than £500,000 in this year alone.

David Cameron visited Colombo to meet Rajapaksa in 2013 at the same time as Prince Charles following the Commonwealth Business Forum sponsored by Lycamobile. Last year, a photo emerged of Allirajah apparently disembarking a military helicopter, but he denied it was provided by the regime and said he had rented it.

Getty / Reuters / Supplied

The prime minister is already facing calls to hand back the money after BuzzFeed News yesterday revealed secret footage of three Lyca bagmen depositing rucksacks stuffed with hundreds of thousands of pounds in cash at Post Offices all over London. The company said it was a cash-rich business and that the deposits were just above-board “day to day banking” but experts including the former director of public prosecutions Lord MacDonald said they were “deeply suspicious” and called for an urgent investigation.

There is no evidence to suggest that the corruption claims in Colombo are connected to the company’s unusual cash deposits in London, but they raise further serious questions about the way the Lyca group conducts its business. The firm, which declared £1.1 billion in global turnover last year and is rapidly expanding in the United States, has avoided UK corporation tax for years by moving revenues out of the country through a complex offshore network. Some of that money ends up in Hastings Trading e Serviços Lda – the Madeira company that acquired 95% of Sky Network, with the president’s nephew retaining the other 5%.

BuzzFeed News interviewed two former executives at Sri Lanka Telecom (SLT) who said the majority state-owned firm was all but forced to pour millions of dollars into Sky Network and got nothing in return. A senior detective in the Sri Lankan police force said it had “started the legal process of investigation” into the deal, and the country’s deputy foreign minister confirmed that the new probe was part of the wider international hunt for assets allegedly stolen during Rajapaksa’s decade of kleptocracy.

Speaking animatedly about a container of gold he believed Rajapaksa’s family had hidden under the sea, cabinet spokesman Rajitha Senaratne sat in an office that epitomised the challenge of a developing nation trying to find and retrieve precious assets now dispersed around the world. Cream-coloured paint peeled off the walls of the government building. There was no air conditioning, only fans which needed restarting every so often. A torn sign Sellotaped to the unmanned reception desk warned: "Please do not put weight on..." The car park was riddled with potholes full of monsoon rain.

Searching for Sri Lanka’s embezzled billions is a daunting task for the new regime, which came to power when Rajapaksa was finally ousted by voters in January this year, especially because it presides over a country still emerging from decades of civil war. Senaratne told BuzzFeed News that investigators believe the Rajapaksa family has gone to extraordinary lengths to hide stolen assets from the state. “They took about 11 containers of cash and gold from the presidential palace,” he said. “We understand they have sealed the containers and taken some underground, and they have dropped one in the sea – we do not know the exact site but we know the area.”

In total, the new government estimates the former president and his cronies have hidden at least $10 billion through a web of offshore accounts, various associates, and business ventures around the world. They believe $5.31 billion was taken out of Sri Lanka in 2013 alone. And they are determined to find the money and bring it home.

Rajapaksa and his wife (right) received state visits from the Prince of Wales and Duchess of Cornwall during his decade in power. The official feed from Clarence House is one of the few accounts he follows on Twitter – along with that of Lord Sugar's business adviser on The Apprentice, Nick Hewer.

Getty / Reuters

Rajapaksa was both feared and revered during his decade in the presidential palace. Many on the island nation of 20 million consider him a hero for finally crushing the 26-year armed rebellion by the separatist Tamil Tigers. But his forces committed war crimes including rape, torture, bombing hospitals, and killing tens of thousands of civilians, according to the United Nations. He presided over a nepotistic circle that controlled, by some estimates, as much as 70% of the government’s budget and five of the largest ministries.

Rajapaksa has consistently denied any wrongdoing. But since January, when he lost the presidency to his former ally Maithripala Sirisena, the new Sri Lankan government’s wide-ranging corruption investigation has circled around the former president, arresting one of his brothers, summoning another to appear before the Bribery Commission, and questioning his wife.

The UK Serious Fraud Office has been providing training to Sri Lankan investigators, and the World Bank and International Monetary Fund are helping to coordinate the hunt for looted assets across the globe, including in the Seychelles, Dubai, India, the US, and Europe.

The task ahead is gargantuan, but Senaratne said there had been some early successes: For example, he said, investigators found more than $1 billion hidden in a Dubai bank account belonging to Rajapaksa’s nephew Himal Hettiarachchi. It is the same nephew whom the company in Allirajah’s Lyca empire joined forces with in the telecoms deal that is now under scrutiny.

The civil war was still raging when Greg Young took the helm of Sri Lanka Telecom as chief executive in February 2009. His first year, he recalled, was “miserable”. The energetic Australian executive had been parachuted into his new position by Malaysian shareholders who wanted him to get to grips with lax business practices at the company, but he said he soon found that insiders tried to block his moves at every turn. SLT had entered into a variety of deals before Young arrived that he said struck him as bizarre. One of those involved a company called Sky Network.

Young discovered that SLT had poured millions of dollars into a joint venture with Sky Network, a company that at that point had no income and was valued at a mere 20 rupees – less than £1. SLT had joined the ill-fated venture to access high-speed data frequencies that would later become obsolete just before Young arrived at SLT. The new executive was baffled by the move and began sniffing around. Eventually, he pieced together what had happened – and his account is supported by internal corporate documents, a second former high-ranking executive with deep knowledge of the Sky Network deal who requested anonymity, and the country's deputy foreign minister.

Sky Network was set up in 2006 and registered to the home address of Rajapaksa’s nephew on Old Kottawa Road, a narrow street in Colombo where the odd palm tree can be glimpsed through the clouds of dirt kicked up by dozens of rickshaws and cars. The company lay dormant for a year, until April 2007, when Hettiarachchi listed himself as a director; around the same time, 95% of its shares were acquired by Hasting Trading e Serviços Lda, based in the Portuguese tax haven of Madeira. Hettiarachchi, a software engineer, retained the remaining 5%. What Young didn’t know was that this company was a major outpost of the Lycamobile empire, owned by the telecoms mogul Allirajah.

Hastings controlled Lycamobile's intellectual property and trademarks and is 90.5% owned by Allirajah’s wife, Premantharshini Subaskaran, according to the most recent accounts for Lycamobile UK. The other shareholders are unknown. A few months after it acquired almost all the shares in Sky Network, Lycamobile’s then chief executive, Milind Kangle, took a seat on the Sky Network’s board of directors alongside Hettiarachchi.

With no customers or assets, Sky Network did not have much going for it. But around the same time as the deal with the Lyca offshoot was sealed, the fledgling venture suddenly had a stroke of lucrative luck. In March 2007 the government telecoms regulator awarded it three licenses for access to coveted high-speed data frequencies – licenses the government had repeatedly denied to SLT.

The majority state-owned telecoms firm had long sought access to faster “Wimax” internet frequencies, but all their entreaties were rebuffed by the government regulator. Instead, the one-year-old venture headed by the president’s nephew was given access to the frequencies, putting Sky Network in a gilded position.

In June 2007, the company reached out to SLT. The state telecoms company was welcome to piggyback on Sky Network’s new Wimax frequencies, but it would have to pay an eye-watering price. Young and the other company executive said SLT was being held over a barrel: to get access to the high-speed frequencies it felt it desperately needed to compete in the market, it had to do business with the president’s nephew.

Rajapaksa's nephew Himal Hettiarachchi (left) and Lycamobile's then CEO Milind Kangle (middle) were both directors of Sky Network. A leaked SLT memo said Chris Tooley (right), the current CEO of the telecoms giant, was also on the board.

Getty / i-images / Supplied

A memo submitted to the SLT board in June 2007 and leaked to the Sunday Leader noted: “SLT has already applied for the WiMax frequency from the Telecommunication Regulatory Commission of Sri Lanka (TRCSL) but despite repeated reminders there has still been no progress to obtain these frequencies … Lyca Group in UK which is a virtual operator in UK has approached SLT for business through its 95% owned subsidiary, Sky Network, which has been given WiMax frequency to operate islandwide.” The memo listed another Lyca executive, its current CEO, Chris Tooley, as a board member of Sky Network, along with the then CEO Milind Kangle and Rajapaksa’s nephew Hettiarachchi. It isn’t known how involved Kangle and Tooley were in the day-to-day running of Sky Network or its deal with SLT.

By early 2008, SLT had agreed to what Young blasted as a “completely flawed” joint venture with Sky Network to offer high-speed broadband services, similar to 4G, to customers. SLT would put up 70% of the costs but would only get a 40% cut of the profits. The remaining 60% would be retained by Lyca’s Madeira company and Rajapaksa’s nephew.

SLT poured approximately $10 million into the venture over four years, according to its former CEO Young. Documents seen by BuzzFeed News show how the state telecoms company poured money into developing the Wimax technology while Sky Network was supposed to bring in the customers. But when Young took over the company, he found that Sky Network was “never able to successfully capture a customer.”

The venture had run into the sand, the Australian said, and the high-speed technology at the heart of the deal was already becoming obsolete. “It was a failed concept,” said Young. “We basically brought a halt to everything.” After an impairment test ordered by the company’s auditor determined that there was no prospect of Sky Network generating any income in the foreseeable future, SLT was told it had to take a write-off on the deal.

Young said he could see no good business reason for SLT having bought into Sky Network: “It was a company that effectively had no assets, had no operations, and had no value – so effectively SLT bought something, paid for it, and it had no value.”

But it had value to Rajapaksa’s nephew Hettiarachchi, who “was given an office, a car, a driver, an expense allowance, and a very generous salary”, said Young. He said Hettiarachchi was paid around $5,000 a month yet had almost nothing to do with the running of the business, turning up to board meetings only once every couple of months. “So we were just forking out of SLT to actually pay his salary and costs, because [Sky Network] wasn’t generating any income.”

Young told BuzzFeed News that the deal was “brokered and presided over” by the SLT chair at the time, Leisha Chandrasena, who was apparently close to Rajapaksa. “It was always reported that she was a classmate of his from law school and she came out of nowhere; no one had heard of her – she was not a prominent lawyer or anything like that,” Young said. “And then one day she was suddenly the chair of the third-largest public business in the country and everyone is asking the question about what was her qualification or credentials to chair a large company. She always alleged that she was close to the president, and certainly there was a lot of evidence of that.” SLT's former CFO confirmed Young's account that Chandrasena was "very close to the ex-president".

Getty / i-images / Lynzy Billing / BuzzFeed

This is Part Three of a BuzzFeed News Investigation.

Part One: This Tory Donor Was Secretly Filmed Dropping Cash-Stuffed Rucksacks At Post Offices.

Part Two: Lycamobile’s Offshore Empire Is Embroiled In Sri Lanka’s Hunt For Stolen Assets.

Suspicious six-figure Post Office cash drops by the Lycamobile group were reported to the police as "prima facie evidence of money laundering" a year ago by the telecoms giant's biggest commercial rival, BuzzFeed News can reveal.

Lebara, a major competitor in the market for prepaid calling cards used by Europe's migrant communities, deployed a team of corporate spies to tail Lyca's bagmen all over London and reported their unorthodox cash movements to the National Crime Agency (NCA).

A major investigation by BuzzFeed News revealed this week that Lyca deploys three men to drive around in unmarked people carriers depositing rucksacks stuffed with hundreds of thousands of pounds twice a day across London. The Conservatives have accepted £1.3m from Lycamobile, and Labour MPs have demanded that the party put a freeze on any further donations from the telecoms giant and consider handing back its money.

The former director of public prosecutions Lord MacDonald QC said the cash desposits caught on film by BuzzFeed News were "deeply suspicious" and demanded an urgent investigation.

Lebara has now confirmed that it orchestrated its own wide-ranging campaign of espionage from May to September last year and passed its findings to the authorities. The operation was commissioned by the prominent law firm Mishcon de Reya, which acknowledged in a letter: "We did, on behalf of our client, engage the services of a private investigator firm to investigate in a lawful and proper manner alleged improper business dealings by Lyca.

"In the course of their investigation the investigators found prima facie evidence of money laundering which they then followed up ... After obtaining criminal legal advice, our client passed the results of the investigation to the appropriate authorities." The NCA refused to comment on what action, if any, it had taken as a result or whether the evidence had been passed to any other government agency.

Lebara insisted that its investigation was geared to probe "alleged improper business dealings by Lyca" and not to obtain commercial secrets.

BuzzFeed News has seen documents, photographs, and footage that reveal how the surveillance targeted Lycamobile chair Subaskaran Allirajah and other bosses including the firm's chief executive, Chris Tooley.

A team of private detectives – many of them former Scotland Yard detectives or government intelligence officers – also dug dirt on Lyca’s finances and political connections. They pored over its donations to the Conservative party, now totalling £1.3 million, and its links to the controversial regime of a former Sri Lankan president accused of rampant corruption and war crimes.

They examined its financial accounts and noted that the company had avoided corporation tax for years by flowing money offshore through a complex network of companies.

But the most explosive of all their findings was the discovery that three cash couriers working at Lyca’s east London depot were ferrying rucksacks stuffed full of around £250,000 a day to Post Offices across London.

Lebara's secret spying campaign illuminates the bitter battle for a growing and increasingly lucrative corner of the telecoms market. But it also shows how bizarre Lyca's practices seemed to a rival in exactly the same line of business. Lyca has said that its huge, scattered cash deposits are perfectly ordinary "day-to-day banking" – but Lebara was so surprised by what it saw on the footage gathered by its spies that its lawyers formed the conclusion its rival could be engaged in money laundering.

The investigation stalled last autumn because, sources say, Lebara got cold feet about its role and did not want it to become public knowledge that it had spied on its rival. The surveillance footage and reports produced by its investigators gathered dust for a year.

However, in May a source with knowledge of Lyca’s business practices approached BuzzFeed News with claims about unusual cash movements at its depot. Our reporters spent the next five months investigating the tip and conducted our own surveillance that showed the bagmen were pumping up to £1 million a week into the company’s Santander bank accounts through Post Office deposits. We also discovered that Lycamobile’s offshore empire is facing investigation as part of an international probe into billions of dollars of state assets allegedly looted by a former Sri Lankan president. Those revelations, published this week, came as no surprise to Lebara, which was sitting on its own incendiary evidence. Today we spill the secrets of its campaign of espionage.

Allirajah's Rolls-Royce was followed to Highclere Castle, where the Conservative party frequently holds fundraising events.

Supplied

The black Rolls-Royce Phantom purred up the gravel drive toward Highclere Castle, where stewards were waiting to help Subaskaran Allirajah and his guests alight for a black-tie gala evening.

The aristocratic estate in Hampshire is famous as the setting for the television drama Downton Abbey. However, the rags-to-riches telecoms tycoon was oblivious to his own starring role in a modern-day spy thriller in which undercover agents were secretly filming his every move.

Surveillance specialists had put a tail on the Lycamobile chair’s chauffeur-driven car for a client – Lebara – whose identity was intended to remain a closely guarded secret.

Lycamobile and Lebara are the crowning achievements of two entrepreneurial Sri Lankan refugees who escaped their country’s civil war at a young age. Allirajah, now 43, went to France, a nationality he adopted, before moving to the UK as a young man with an interest in the emerging mobile telecommunications business. Ratheesan Yoganathan, now 39 and the chair of Lebara, fled to India and then to England, where he completed a degree in aeronautical engineering before going to work for Allirajah.

In 2001, he left his mentor with two other Tamil employees to set up a rival telecoms firm, initially in the Netherlands and then in the UK. Some insiders speculate that this may be the cause of bad blood between the two men. Lyca is the dominant force in the UK prepaid calling card market, with Lebara snapping at its heels. Both companies are also rivals in the low-cost money transfer market, which migrant workers in Europe use to remit their earnings to relatives in Asia, Africa, and the Middle East.

Both firms have carefully crafted socially responsible reputations by funding charitable foundations for underprivileged children and sponsorship deals in the worlds of sport and entertainment. Lebara lends support to a leading black music awards ceremony, while Lyca sponsors West Ham United football club.

Lebara said it hired agents to spy on its rival after hearing allegations of impropriety against Lyca. But one source close to the niche firm of former Scotland Yard surveillance specialists who did the work said the mission was to find dirt that Lebara could use to gain a commercial advantage over its rival. “The briefing was that Lebara was looking to take Lyca’s franchises,” said a well-placed source, referring to the shops where the firms sell their prepaid calling cards and SIMs.

Whatever the true motives, Lebara brought in Mishcon de Reya to act as a middleman between the company and its investigators. Last May, the law firm assembled a team of eight operatives to tail Allirajah in cars and on motorbikes from his house on millionaire’s row in Chigwell, Essex. The £2 million gated family house is separated by just one mile and a golf course from where his rival Yoganathan lives in similar suburban luxury.

Allirajah (left) and his former protégé turned business rival Yoganathan.

i-images / Getty

Allirajah was followed and his movements were logged and reported back. However, according to an insider, the focus of the surveillance suddenly switched shortly after the gala evening at Highclere Castle on 29 May.

The undercover team’s new target was a Lyca depot on an industrial estate in Beckton, east London. Their job was to observe the comings and goings at the warehouse where Lyca stores its prepaid calling cards and – the spies would soon discover – vast amounts of cash.

Days of watching and logging developments passed before the surveillance team identified a pattern of behaviour. A group of Sri Lankan men would arrive in their own cars and leave together in a Ford Galaxy people carrier carrying a bulging rucksack or wheeling a suitcase.

The vehicle was followed as the men visited a variety of Post Offices, some as far as 17 miles from the depot. Eventually, the surveillance operatives followed the men inside the Post Office branches where they observed that large packages of cash in £20 and £50 notes were being handed over. The undercover operatives estimated that the total value of the cash going over the counter every day was in the region of £250,000. The deposits were recorded in a beige ledger-like hardback book that one courier carried.

Sometimes they were close enough to pick up what the Lyca couriers were saying to each other and the Post Office tellers. According to one log, “the cash couriers are overheard discussing a film being produced and mention the name ‘Alirajah’ [sic]. They joke about how they should make a film about themselves.” The irony was not lost on the surveillance team who were secretly filming.

The operatives expressed surprise at the risk Lyca was taking by transporting so much money in this way and wondered why so many Post Offices in London were being used when 20 other financial institutions within a 1.5-mile radius of the depot were available.

The selection of Post Offices visited on a daily basis “does not reflect the closest, safest or most obvious possible locations to make deposits of money”, one surveillance log recorded. The general consensus of the former Scotland Yard detectives was that what they were seeing was “very suspicious” and they raised the possibility that "the patterns of behaviour are associated with money laundering".

Lyca has said that it runs a cash-rich business and that its deposits are entirely above board. After BuzzFeed News conducted its own surveillance of the bag drops, the company said it was simply doing “day-to-day banking”. It said today that it was “completely unaware” of Lebara’s surveillance activities.

The daily routine of the Lyca cash couriers also included visits to an address in East Ham, where operatives observed what they regarded as “suspicious individuals” coming and going with “rucksacks or white plastic bags”. The log reported that a 52-year-old Afghan male owned the East Ham address and was involved in distributing prepaid calling cards and was also the director of a short-lived money exchange company.

The couriers were later followed to Lyca’s smoked-glass headquarters in London’s Docklands, where a new target was identified.

According to a surveillance log dated 11 June, Christopher Tooley, Lyca’s 50-year-old chief executive, was followed at 2:28pm to Manjal, a Docklands restaurant. Operatives sat at a nearby table eavesdropping and filming the Lyca executive having lunch with two men who they reported were discussing, among other things, the movement of money from Africa.

The spies followed Lyca chief executive Chris Tooley (top left image, on the right) to a business meeting in a restaurant in which he was heard discussing moving money out of Africa.

BuzzFeed News

The surveillance operation also targeted a member of Allirajah’s family. Sakthy Pillainayagam, believed to be the Lyca chair’s brother-in-law, worked at the east London depot in a managerial role. He was secretly filmed with one of the cash couriers and followed to and from his home.

According to well-placed sources, the private investigators believed the daily six-figure cash deposits could not be understood in isolation from the company’s finances. Experts were therefore enlisted to scour the accounts and balance sheets for any evidence that might point to tax evasion or other illicit financial activity.

They also traced Lyca’s enviable political connections to David Cameron and Boris Johnson through its substantial donations to the Conservative party. Allirajah has bought a place in the prime minister's exclusive dining club for top donors and once paid £210,000 at a Tory fundraising gala for a bronze bust of Margaret Thatcher.

The spies were also interested in Allirajah’s connections to former Sri Lankan president Mahinda Rajapaksa, whose 10-year rule, which ended this January, was mired in allegations of corruption, cronyism, and war crimes against the Tamil people. The investigators searched for evidence of any joint investments between the Rajapaksa family and the Lyca group of companies. The reports by the team of eight former intelligence officers and Scotland Yard detectives did not identify any connection between Allirajah and the despot's family. However, BuzzFeed News revealed Tuesday that a "shady" deal between the telecoms giant's offshore empire and Rajapaksa's nephew is facing investigation by Sri Lankan authorities.

In September 2014, the corporate espionage was halted and a decision made to approach to the Post Office with the findings. A well-placed source described how one of the investigators had a “strange meeting” with two senior Post Office compliance officers. The officers had come to the meeting carrying a large file, the investigator reported back, but refused to take away any of the covert footage or discuss the evidence of Lycamobile’s cash deposits in any detail. A Post Office spokesperson refused to comment on the meeting or its outcome, but insisted in a statement that it was fully compliant with all its regulatory obligations and that any suggestion to the contrary would be “unfounded”.

But Lebara had been told that its investigators had "found prima facie evidence of money laundering" and wasn't prepared to let the matter rest. The company sought "criminal legal advice" and then passed the results of the investigation to the National Crime Agency. However, sources say that soon afterward Lebara got cold feet about its involvement becoming public and stepped away.

Then, in May, BuzzFeed News received its own tip about Lyca's strange cash movements and began digging. Reporters began surveilling the company's depot and tailing the bagmen to their network of post offices, as well as scouring the company's accounts and interviewing sources. In the course of our own investigation, BuzzFeed News stumbled upon evidence that Lebara had enlisted corporate gumshoes to perform an almost identical surveillance operation to the one our reporters were undertaking. BuzzFeed News subsequently interviewed sources close to the 2014 spying campaign and saw footage, surveillance logs, and financial reports gathered by the investigators.

Approached at his Essex home earlier this month, Lebara owner Yoganathan made no comment when asked why his company had hired a team of spies to tail the men from Lyca, nor did he answer any other questions. Deluxion Morris, Lebara’s corporate development manager, said: “As a business we do not generally comment on competitor activities, as it is not the company policy.”

But just hours before this article was due to be published, BuzzFeed News received a letter from Mishcon de Reya admitting, finally, that Lebara had conducted the espionage and passed its evidence to the police.

The question now is: What, if anything, did the authorities do about it? When contacted by BuzzFeed News, the NCA did not give a clear answer. It said that, when it receives information which it believes warrants "a response," it may either lead an investigation itself or "support other agencies, coordinate and share information with partners". The statement concluded: "The NCA does not routinely comment on its sharing of information or the existence or status of investigations be they by the NCA or another agency.”

Below is the letter Mishcon de Reya sent BuzzFeed News on behalf of Lebara. (For a PDF version, click here.)

The law firm said the letter was "strictly not for publication," but BuzzFeed News had made no such agreement.

The chairman of Lycamobile, Subaskaran Allirajah

i-images

The Tories have accepted a fresh donation of £217,500 from Lycamobile in defiance of calls on the party to sever its ties with the controversial telecoms group.

The latest Electoral Commission data shows the company donated £117,500 in the last quarter, while its Sri Lankan-born owner Subaskaran Allirajah made a personal gift of £100,000. Lycamobile has now given the Tories more than £1.5 million since David Cameron came to power, despite avoiding paying any corporation tax in the UK for years by moving revenue out of the country through a complex offshore corporate network.

The Tories have faced mounting calls to freeze all donations from Lycamobile after BuzzFeed News revealed its highly unorthodox financial activities in October. The company employs three cash couriers who were caught on film depositing rucksacks stuffed with hundreds of thousands of pounds twice a day in post offices scattered across London.

Lycamobile's bank, Santander, has now launched an internal investigation into whether anti–money-laundering protocols have been breached by the deposits, which were branded "deeply suspicious" by the former director of public prosecutions, Lord MacDonald QC.

“The use of unmarked vehicles, the lack of any security arrangements, the repeated deposits of huge sums of cash to multiple branches of the Post Office, is all conduct that cries out for explanation,” Lord MacDonald said. “Frankly, this is not the way a normal … business deposits its cash. ... It demands serious investigation.”

Government investigators in Sri Lanka are separately probing a key offshore company in the Lyca empire that is suspected of helping deposed president Mahinda Rajapaksa launder millions of dollars stolen from the state.

Labour last night attacked the Tories over the decision to continue taking company's money. "Serious concerns have been raised about the business practices of this company, which must be urgently addressed," said Peter Kyle MP. "The prime minister once said that sunlight was the best disinfectant – with that in mind, he needs to explain exactly what checks have been carried out by the Tories to ensure everything with regard to these donations is above board.”

Jon Ashworth, the shadow minister without portfolio, wrote to Tory party chair Lord Feldman last month demanding that the party sever its ties with Lycamobile, but received no response.

The fresh donations were made on 4 September but the Conservatives only reported the gift to the Electoral Commission on 29 October — weeks after BuzzFeed News revealed the company's suspicious business practices.

BuzzFeed News also revealed that Lycamobile was reported to the police for suspected money laundering after its closest rival hired a team of spies to tail its bagmen as they performed their post office cash drops. However, the National Crime Agency has refused to comment on what action, if any, was taken.

Lycamobile denied any wrongdoing and insisted its cash deposits were just "day-to-day banking".

Read the original BuzzFeed News investigation:

Part One: This Tory Donor Was Secretly Filmed Dropping Cash-Stuffed Rucksacks At Post Offices

Part Two: Lycamobile’s Offshore Empire Is Embroiled In Sri Lanka’s Hunt For Stolen Assets

Part Three: Tory Donor Reported To Cops For “Money Laundering” After Rival Spied On Cash Drops