LATVIA looks set to deliver a major blow to Scotland’s secret “tax haven” firms as it cracks down on money-laundering through its banks.

The Baltic state has said that it will ban its financial institutions from providing accounts to anonymously owned shell companies, such as increasingly notorious Scottish limited partnerships or SLPs

The move comes as the UK Government said it too will act on SLPs, which effectively allow their owners to remain secret, pay no taxes and file no accounts.

For some years criminals and tax-avoiders have used SLPs with accounts in Latvia or other Baltic nations to move vast sums of money out of the former Soviet Union.

BACKGROUND: A quick guide to Scottish limited partnerships and their abuse

Latvia stepped up action against its banks - and shell firm abuse - under renewed pressure from the United States.

The European Central Bank in February effectively ordered the closure of one Latvian bank, ABLV, which was linked to North Korean laundering and whose accounts were marketed alongside SLPs.

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Scotland, re-imagined as a tropical tax haven island

Latvia’s finance minister Dana Reizniece-Ozola earlier this month said America believed Latvian banks were still being used to launder money despite a series of scandals.

After a meeting with a US counterpart, she said: “We are being told that banks are still used to transfer funds associated with persons, companies or countries on which sanctions have been imposed.”

Analysis: Watchdogs have grown teeth to crack down on money-laundering

But Latvia’s crackdown piles new pressure on UK authorities to shore up policing of its four million corporate entities.

The Financial and Capital Market Commission, Latvia’s financial regulator, said nearly a third of all shell companies with accounts at Latvian banks were British. It did not say how many were SLPs or other Scottish, English or Northern Irish shell firms.

Another 18 per cent were registered in the British Virgin Islands, which means, Latvian Public Broadcasting stressed, that more than half the shell company accounts in Latvian banks are the UK’s responsibility.

British shell firms, especially Scottish ones, are partly popular in the former Soviet Union because they do not fall under tax haven blacklists.

Shell firms from traditional secrecy jurisdictions, such as Panama, were far less popular than UK entities, the Latvian Commission said.

Another bank whose accounts were offered as a package alongside SLPs is Rietumu, which is one-third owned by Dermot Desmond, Celtic’s main shareholder.

Speaking before Latvia announced its crackdown, Rietumu said it was ditching shell firm and other risky clients.

The Herald: Celtic shareholder Dermot Desmond.

Dermot Desmond

A Rietumu spokesman told Latvian media: “For several years, Rietumu Banka has been turning away high-risk clients and substantially reducing the amount of transactions, as the bank has shifted its focus on deposits, loans and technological development.”

The bank is currently appealing the biggest fine in French history for facilitating tax evasion. It has also been rapped by its own regulator for allowing itself to be used to launder money from North Korea after an FBI investigation.

There have been international concern for some time about Latvia’s “non-resident banking” where a largely Russian and Ukrainian clientele was able to open dollar accounts through shell firms.

The chairman of Latvia’s central bank was detained in February on corruption charges. He is suspected of taking bribes from an unnamed bank.