Labour candidate’s failed FX firm held £2.7m for company embroiled in bribery scandal
The collapsed foreign exchange (FX) firm owned by Labour candidate and former deputy mayor of London, Rajesh Agrawal, was holding millions of pounds in cash for a Maltese company linked with a bribery scheme, City PM can reveal.
RationalFX, co-founded in 2005 by Paresh Davdra and Rajesh Agrawal, the former deputy mayor of London for business and current Labour candidate for Leicester East, claimed to have handled over $12bn worth of international payments before it folded into administration in November last year.
Clients of the company were left nearly £15m out of pocket by its administration due to a “shortfall” in safeguarded funds, according to administrators’ documents filed in January.
The company owed some £4.2m to its EU customers alone, according to the documents. However, City A.M. can reveal that £2.7m of that was owed to a single Maltese logistics firm called MLS Multinational Logistics, which was previously implicated in a bribery scheme involving the US Navy.
MLS Multinational Logistics was formerly run by Frank Rafaraci, who between 2013 and 2021 “gave, offered, and promised money” to a public official in exchange for opportunities to win contracts for his company, according to US prosecutors.
“Frank Rafaraci allegedly bribed a Navy official for years,” said Assistant Attorney General Kenneth A. Polite Jr. of the Justice Department’s Criminal Division in a March 2023 press release.
Rafaraci was sentenced to over a year in prison in November after pleading guilty to bribery.
There is no suggestion that RationalFX was involved in the scheme. It is unclear when MLS deposited the funds in RationalFX.
A lawyer for MLS said the company had funds with Rational FX as an “intermediate stage pending the final movement of these funds to a bank account”.
“The funds belong to the company and represent revenue from its business with its clients. There is no link to the case against Frank Rafaraci,” the lawyer said, adding that it was looking to recover the funds through the insolvency process.
However, the revelation that Rational FX was holding millions of pounds of cash for MLS raises further questions over its know-your-customer checks, after City A.M. revealed it was implicated in the infamous Natwest ‘bin bags of cash’ alleged money-laundering scandal in the UK.
Agrawal stepped down as chief executive of the firm in 2016 and resigned as a director in 2022. However, he still owned the majority of the company when it collapsed in November last year, with a stake of over 50 per cent, according to Companies House.
While he was still chief executive in 2014 and 2015, Rational FX was used by the Bradford-based gold firm Fowler Oldfield as part of a scheme in which it deposited £365m into Natwest accounts, City A.M. revealed last week.
Some £264m of that was deposited by Fowler Oldfield in cash, sometimes transported to the bank via bin bags which were said to be splitting due to the weight of the money.
According to a suspicious activity report, filed as evidence by the prosecution in the case in 2021, millions of pounds deposited by the gold merchant were whisked out of Natwest bank accounts and onto Rational FX.
“By the time of [one suspicious activity report], around £12.7m had already been paid from this account to RationalFX, an [money services business] providing foreign exchange services,” the document read.
The collapse of Rational FX and revelations over its customers raise major questions over Agrawal and Davdra’s management of the business. Agrawal has made his past as a fintech entrepreneur a key pillar of his pitch to voters.
“As a fintech entrepreneur, I built a team that challenged the status quo by lowering the cost of moving money for migrant workers and businesses alike,” he writes on his campaign website.
He has sought to distance himself from the company’s collapse, saying via a spokesperson that MLS Multinational Logistics was not a client during his time as chief executive “to his knowledge”.
After City A.M. contacted Agrawal for comment, a Labour Party spokesperson replied: “Rajesh Agrawal stood down as CEO in 2016 and took up a role as non-executive director and was not active within the business. He stood down as a non-executive director in 2022.”
Agrawal has not been investigated by police, City PM understands. A spokesperson for Agrawal claimed the company complied with all anti-money laundering regulations while he was in charge.
The Financial Conduct Authority is working with the company’s administrators and is looking to understand the circumstances that led to its insolvency, City A.M. understands. The FCA declined to comment.
Paresh Davdra did not respond to a request for comment after City A.M. approached his company Lux Algarve.