The International Monetary Fund has warned of the risk posed by Scotland's controversial 'limited partnerships' to the fight against global money-laundering and organised crime.
The IMF singled out the Scottish firms - which are widely used as tax avoidance and secrecy vehicles by Eastern European organised crime gangs - as it flagged up wider reforms it wants to see in the UK.
The Sunday Herald has exposed how Scottish limited partnerships or SLPs have acted as fronts for websites peddling child abuse images, and revealed that they have been part of major corruption cases in Ukraine, Uzbekistan and Latvia, including in the arms industry.
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How The Sunday Herald revealed the SLP role in child abuse websites this month
IMF officials said SLPs - which can be used to open bank accounts for anonymous owners - should be subject to anti money-laundering measures, such as rules which force other UK companies to name their ultimate owners.
The IMF remarks, in a new report on Britain's progress against money-laundering and terrorism financing, echoes concerns raised by Britain's own Home Office.
In its controversial risk assessment on money-laundering, the Home Office found that even police felt SLPs were hard to hold accountable. It said: "The relative freedom from filing obligations enjoyed by partnerships reduces the ability of law enforcement to easily make initial enquiries. This means that law enforcement agencies have a reduced ability to identify whether this type of structure is being used for legitimate or illicit activity."
There are currently more than 400 SLPs being registered every month, almost all with opaque partners in traditional tax havens such as Panama and Belize. Such Scottish firms are specifically marketed as "Scottish zero-tax offshore companies" with no requirements for regular financial filings - but come with a prestigious UK address.
Most notoriously, SLPs were allegedly used to funnel the proceeds of the $1bn looting of the banks in the tiny former Soviet republic of Moldova. This week another SLP emerged in the news in Ukraine, amid calls for police investigation in to the "grab" of an agricultural business by unknown investors.
The Scottish Government has called on its UK counterparts to act on SLPs - which are a reserved matter - amid concerns for the country's reputation. Opposition Labour, Green and Liberal Democrats have also raised concerns Earlier this month SNP MP, Roger Mullin, lodged an amendment to the finance bill calling for a review of SLPs. His proposal was outvoted by the Conservatives.
Mullin said: "Following the latest revelations and the UK Government's opposition to my recent amendment to the Finance Bill, I am writing to Chancellor Philip Hammond to seek a meeting.
"Amongst other actions, I will be asking for clear action to be announced no later than the forthcoming Autumn statement."
SLPs are a particularly popular form of corporate entity but very much part of a UK-wide "brass plate" market for shell companies sold off the shelf, usually with other shell companies from tax havens as their partners or shareholders.
Such firms, boasting what is seen as a high prestige address in a fake office in Scotland, are then used to open bank accounts, typically in Latvia. The tax haven shareholders or directors of such firms are also sold off the shelf to buyers looking to "invest" outside the former Soviet Union. This comes in a package with power of attorney over nominee directors - often housewives in Caribbean islands or workers in India - who are essentially covers for the real owners of the businesses.
The IMF, in its technical report, called on Britain to "consider adopting disclosure requirements for nominee directors. The IMF and Home Office recommendations are firmly in line with international warnings about companies with all the characteristics of SLPs.
The intergovernmental Financial Action Task Force on Money-laundering, for example, as long ago as 2010 highlighted basic warning flags for global graft. These included "the use of legal persons and legal arrangements established in jurisdictions with weak or absent anti-money laundering laws" and "the use of complex and opaque legal entities and arrangements". It also highlighted trust or company service providers - jargon for the businesses who produce off-the-peg shell companies - which advertised their "jurisdictions as facilitating anonymity and disguised asset ownership".