01 May 2018
The government has published a consultation into changes to Scottish limited partnerships (SLPs), which it says are being used to launder billions of dirty money for criminals.
SLPs are business entities created by two or more partners where at least one partner is liable for what they invest.
The proposed reforms, which seek to shed transparency on who runs limited partnerships and to combat financial crime, include requiring organisations to have a real connection to the UK and also ensuring SLPs do business or maintain a service address in Scotland.
The plans come following numerous reports of UK firms being easily set up and used to launder billions for criminals.
In one scheme, over 100 SLPs were used to move up to $80 billion out of Russia, the government said, but did not elaborate on the details.
Under the proposals, new SLPs will also need to be registered through a company formation agent.
The latter would subject ‘frontmen’ to anti-money laundering checks, the Department for Business, Energy and Industrial Strategy (BEIS) said.
Companies House would also be required to remove limited partnerships from the company register if they are dissolved or are no longer operating, BEIS added.
“SLPs have been exploited in complex money laundering schemes,” BEIS said, “they have also been linked to international criminal networks in Eastern Europe and around the world, and have allegedly been used in arms deals.”
According to government figures, five frontmen were responsible for over half of 6,800 SLPs registered between January 2016 and mid-May 2017.
By June 2017, 17,000 SLPs, over half of all SLPs, were registered at just 10 addresses.
Business Minister Andrew Griffiths said:”Scottish Limited Partnerships are being abused to carry out all manner of crimes abroad – from foreign money laundering to arms dealing. This simply cannot continue to go unchecked and these reforms will improve their transparency.”
Nienke Palstra, anti-money laundering campaigner for Global Witness which has carried out extensive research and exposed a number of loopholes in the British system, welcomed the announcement, adding: “The crackdown should ensure all loopholes are closed, including tackling the problem of the woeful track record of many company formation agents in conducting anti-money laundering checks.”
Count this content towards your CPD minutes, by signing up to our CPD WalletFREE CPD Wallet