THE number of new “tax haven” firms exploiting a money laundering loophole that embarrassed Scotland and facilitated organised crime has collapsed following a Herald investigation.
New rules introduced this summer forced the people controlling the controversial Scottish Limited Partnerships (SLPs) to be identified.
Conservative ministers imposed the emergency legislation to bring the SLPs into line with European Union anti-money laundering rules.
Herald View: Scottish shell company crackdown pays dividends
Their move came after pressure from former SNP MP Roger Mullin and a two-and-half-year ongoing Herald investigation which revealed mass organised crime abuses of SLPs, shell firms internationally marketed as “zero-tax offshore companies”.
The UK Government announced on June 23 that from July 24, SLPs must file a "person of significant control" report of the kind now routinely required of other businesses.
A Herald analysis of SLP registrations since the announcement shows a dramatic decline in the number of new firms.
There were 116 SLPs registered in the week when the announcement was made. There were just seven in the week when it began to come in to force, beginning on July 24. In the same week a year ago, there were 131 registrations.
However, the drop in registrations in SLPs is partly offset by a rise in those for English limited partnerships, which are not subject to the UK Government’s “person of significant control” rules.
Herald View: Scottish shell company crackdown pays dividends
There were 64 such firms registered in the week from July 24, compared with just 13 in the week when the SLP measure was announced.
Alison Thewliss MP
Glasgow Central MP Alison Thewliss said: “I am delighted that after a two-year campaign led by the Herald, my tenacious former colleague Roger Mullin, and the SNP, the UK Government is finally taking steps in the right direction to clamp down on the abuse of SLPs.
“The drastic reduction in uptake of SLPs has coincided with new transparency rules and demonstrates that the relentless two-year campaign on this issue is starting to pay off.”
However, Ms Thewliss added: “The UK Government must now take further action to guarantee that the abuse of SLPs is not transferred to other limited partnerships.
“We still need greater transparency on international financial transactions. While the latest development is welcome, much more must be done to combat the international flows of criminal financing which originate from SLPs.”
Herald View: Scottish shell company crackdown pays dividends
Over the last two years The Herald and international partners have identified hundreds of SLPs and other Scottish shell companies involved in everything from mass tax avoidance and unethical online business to alleged serious criminality, including child pornography, corrupt arms exports from Ukraine to the Middle East and the biggest money-laundering case ever identified in which $20 billion was transferred out of Russia.
SLPs named by this paper include more than 40 fronting for unregulated financial gambling sites operated from Israel. Police in Jerusalem have described that industry as a “monster” representing a huge organised crime enterprise.
Israeli police in the Knesset this week
There are a total of some 30,000 SLPs. They have until later this month to reveal their “persons of significant control”, if they have them, or face a fine of £500 for every day they fail to do so.
Shell firms from New Zealand were previously popular in the Soviet Union and other markets. Canada, in a parallel scandal to Scotland’s, has seen a significant rise in its limited partnerships being abused by international criminals and tax avoiders. The UK has four million registered companies and firms but just six staff, as The Herald revealed, to police their filings.
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