Money Laundering: Global fraudsters use sea fortress as passport to riches

Money-launderers and drug-dealers have discovered a new way to fool banks and fraud investigators; they use false identities and pretend to be from a fictitious country. Steve Boggan discovered how they are using their new scam all over the world - and how effective it can be.

Fake passports from a self-proclaimed "principality" off the English coast are being used by criminals in multi-million pound money-laundering and drug-smuggling operations.

In the latest case to surface, law officers in Slovenia found that forged diplomatic papers from the Principality of Sealand were used to open bank accounts through which the proceeds of illegal pyramid investment schemes in eastern Europe were channelled.

Bank and customs officials around the world have been fooled into accepting Sealand passports as valid - even though the principality is nothing more than a Second World War naval fortress, seven miles off the coast of Felixstowe.

The principality was founded 30 years ago by Roy Bates, 75, a wealthy businessman who lives on the concrete platform with his wife Joan. He declared independence in 1966 and produces his own passports, stamps and coins but he has no dealings with the criminals and is furious they are forging his papers.

During the past year, evidence has emerged that fake Sealand passports have been used by crooks all over the world. Passports seized in the Slovenian caper had entry and exit stamps from at least 10 countries, including Bulgaria, Romania, Iraq, Iran and Libya. Police are examining evidence that 4,000 forged Sealand passports were sold at around pounds 1,000 a time to Hong Kong citizens before the handover to China in July. The Independent has been told that drug smugglers have also been apprehended carrying the fake papers.

Mr Bates was enraged to learn that Torsten Reineck, the German on whose houseboat Andrew Cunanan committed suicide after the murder of Gianni Versace, carries a Principality of Sealand passport. It is understood he drives around Los Angeles in a car with Sealand "diplomatic plates".

Mr Bates, who uses the title of Prince, says international lawyers believe his declaration of independence is valid because, when he made it, the fort stood outside British territorial waters. Britain later extended its waters to include Sealand and does not recognise it as a principality.

Whether or not his passports are valid, the Prince of Sealand said yesterday that those being used by criminals were not issued by him. "Every country in the world has problems like this," he told The Independent. "The world is awash with fake passports. I'm just angry they're faking mine and using them for illegal purposes."

Interpol was alerted to the latest scam by the Slovenian authorities last year, after two Austrians opened a bank account in false names using a Principality of Sealand diplomatic passport. At first, the bank suspected nothing, but its manager called in the Slovenian Office for Money Laundering Prevention (OMLP) once 12 million deutschmarks (pounds 4.36m) arrived in a one- month period from Germany, Luxembourg and the UK.

"The couple posed as husband and wife, and the man described himself as minister of economic affairs for the Principality of Sealand," said Klaudijo Stroligo, director of the OMLP. "There are so many new states and young countries now that the bank official accepted the passport as identification to open the account."

Mr Stroligo and Barbara Brezigar, the state prosecutor, were alerted by the bank after the couple withdrew 200,000 marks and later made arrangements to draw out a further 4 million marks. The bank allowed them to draw out a smaller amount and the couple were followed to the border with Italy, where they failed to declare the cash and were arrested.

However, they could be charged only with forgery and were granted bail by a judge. Ms Brezigar said the case was still live, but the couple are now in Austria and she does not expect to see them again. During her investigations, papers were seized, bearing the Principality of Sealand letterhead, addressed to a number of countries and asking for aid. Mr Stroligo refused to say which countries responded but he said several had replied, promising money.

"It presented us with a strange philosophical question," he added. "It was about territoriality and recognition. Did we recognise these passports or not? Who is to say what is or isn't a country? For a time in 1991, after Slovenia was briefly caught up in the Bosnian war, many countries refused to recognise our nation."

News of the underworld's fascination with Sealand came as no surprise to Mr Bates. Over the past three decades, his domain has been targeted several times by gangsters who want to use it as a tax dodge or a haven for illicit activities. In the 1970s, the fortress was invaded by Dutch gangsters who took his son, Michael, hostage. Mr Bates and a number of supporters re-took it after landing by helicopter and surprising the invaders.

A spokeswoman for the Home Office said Sealand, which is officially known as "Rough's Tower Gun Platform", was part of the UK and described its passports as "fictitious". It is understood that Interpol has put out an alert for immigration authorities to watch out for Sealand passports.