Nicholas Watson in Prague -

As bne has been reporting, the UK's lax regulation over shell companies means it has become a magnet for money-laundering and tax evasion by murky interests from the former Soviet Union. So the UK government's announcement it will soon force all British-registered firms to publicly reveal their true ownership has been welcomed by pressure groups. Yet in the background new destinations for such shady money are already opening up, hoping to avoid the sunlight coming to the UK.

In a speech to the Open Government Partnership Summit in London on October 31, British Prime Minister David Cameron surprised observers by going further than many had expected by laying out plans to create a central company register revealing the true owners of companies, which will be open to the public for scrutiny, not just the tax authorities as many feared. This more open option is believed to have been pushed by Business Secretary Vince Cable.

Currently, Companies House holds a database of merely legal ownership information of companies, though many of these are shell companies - outfits that exist on paper but have no real assets or employees and whose only purpose is to often facilitate dodgy transactions and hide true ownership, often with the help of a friendly lawyer. These can be set up with 15 minutes of spare time and a credit card.

"All UK companies have a register that lists who directly holds their shares. However, this doesn't necessarily identify the ultimate beneficial owner - the individual who really owns and controls the company. There is currently no duty on companies to hold this information as a matter of course. Individuals can hide their interest in a company to facilitate crime - from money laundering to tax evasion," Cable wrote recently in an oped piece. "The inherent complexity of company structures can make it difficult for tax authorities and law enforcement agencies to uncover wrongdoing. It is clear that there is a direct link between a lack of transparency in the ownership of companies and illicit activity."

The practice of setting up shell companies ballooned with the previous Labour government's policy in 2000 to allow the formation of limited liability partnerships (LLP), which are very lightly regulated and under many circumstances not even required to submit tax returns.

Operating under the radar became so easy that Global Witness, an anti-corruption campaign group, issued an "Idiot's Guide to Money Laundering", which explained in five easy steps how to legally disguise the ownership of a business to conceal the flow of money. bne's investigations, for example, uncovered a hive of shell companies for Ukrainian, Latvian and Moldovan interests registered in a south London street called Tooley Street.

"The reason there are so many companies registered at this address is that we are a company formation agency," Brian Wadlow, manager for a number of company service providers at 122-126 Tooley St, as well as at number 88a, told bne during an investigation earlier this year. "And the reason that there are so many companies from Eastern Europe here is that we have someone - agents - in those countries."

A register that includes the beneficial ownership was one of the key demands of campaigners when the UK chaired June's G8 summit of world leaders in Northern Ireland. The fact Cameron has gone further by looking to create a public register by 2015 has pleased many.

"Global Witness' investigations have shown how anonymous shell companies are the global getaway cars for crime, corruption and tax evasion. Full credit should go to the Prime Minister and the Business Secretary for acting to take away the keys," says Gavin Hayman, director of campaigns at Global Witness. "Life is about to get much more difficult for corrupt politicians, arms traders, drug traffickers and tax evaders. Others countries, including the British tax havens, the EU and the US, now need to follow the UK's leadership and commit to publishing information on who ultimately owns companies."

Indeed, Cameron says he intends to call on other countries to back the UK's hardline approach. The problem is, though, that dirty money is like a raindrop running down a car window, which will just change direction to find the path of least resistance. And already there are new destinations opening up.

As bne has reported, firms that incorporate offshore entities - including those who act as agents for Latvian banks, notorious in the region for being a conduit for dirty money - are increasingly offering South African, Scottish and Canadian shell companies. Even squeaky-clean Denmark is showing signs that the corporate rot could set in there. In particular, the Danish equivalent of the UK's notorious Limited Liability Partnership - the kommanditselskab, or K/S - is being touted as the next hot thing, potentially providing anonymity and tax exemption in a jurisdiction with spotless reputation.