The SNP looks set to challenge a legal loophole that critics say has made Scotland a soft-touch for international money-launderers and tax evaders.

Justice Secretary Michael Matheson has said he is "very open" to reviewing controversial Scottish limited partnerships (SLPs) after The Herald revealed they were being marketed across Eastern Europe as tax avoidance vehicles.

They are promoted across Eastern Europe as "Scottish zero-per-cent-tax companies" in the "Scottish offshore zone".

This is because - unlike English partnerships - the Scottish firms do not have to provide financial reports or register for tax if it conducts its business overseas.

Until now, when challenged on limited partnerships, Scottish officials have simply stressed that company formation law was reserved to Westminster.

HeraldScotland: Justice Sec Michael Matheson

But Mr Matheson, pictured above, has now revealed he will seek to end the dubious practice.

He said: "I am very open to looking at whether there is a need to improve the legislation and, if necessary, to make representations to UK ministers.

"We need to make sure that the legislation that is in place is operating as effectively as possible."

Mr Matheson's remarks come more than six months after such firms - often registered in unglamorous housing schemes - were used as part of an alleged elaborate scam to loot $1bn from Moldovan banks.

Background: Ian Fraser and Richard Smith write in the Sunday Herald on the Moldovan bank scandal

Labour and the Greens have been campaigning for action on SLPs and it is understood senior police figures were concerned about Scotland's role in the Moldovan bank scandal.

HeraldScotland: Writer Andy Wightman

Scottish Greens spokesman Andy Wightman, pictured, said: "We welcome the Scottish Government’s willingness to engage with this issue.

"There have been alarm bells ringing about SLPs for years and it does Scotland’s reputation no good to be associated with a legal vehicle that can so easily be abused.

"The fact that the law in this area is reserved does nothing to prevent a vigorous effort to clean one of Scotland’s dirty little secrets."

The legislation governing SLPs date from 1907.

The English and Scottish Law Commissions recommended reform as far back as 2003 but no action has been taken by successive UK governments since.

The Scottish Law Commission - in its submission to last year's Smith Commission - called for the devolution of the laws governing firms.

The statutory body, which stressed that company formation laws were already devolved in Northern Ireland, said: "The modernisation of the law on partnership would be a useful development in Scotland."

The number of SLPs has more than doubled since 2009 on the back of a booming Scottish cottage industry creating them for foreign investors, especially from the eastern and south-eastern edges of the European Union.

SLPs are now part of a range of offshore products that law enforcement experts say can be exploited to funnel money out of some of Europe's poorest nations.

A classic scheme sees an SLP set up with two shareholders or, strictly speaking, "members" which are themselves companies based in Panama and the British Virgin Islands, where corporation tax is zero per cent.

The resulting SLP carries the kudos of a "British" company and can open a bank account elsewhere, such as Cyprus or Latvia, but has no need to register for UK tax or provide full financial accounts in Scotland.

Such a firm can then be used to move money from east to west without attracting the attention of officialdom.

Capital flight, legal or illegal, is a huge issue in the former Soviet Union. Nearly $60bn left Russia alone in 2015. And that was a huge improvement from from than $150bn in 2014.

One typical Russian-language advertisement for SLPs offers partnerships, complete with "nominal" or front-man shareholders and a Scottish legal address, for just 2000 Euros. The whole process takes just seven weeks.

Another firm, with addresses in England, Cyprus and Russia says it can provide an off-the-shelf "ready-made" SLP in half an hour.

The advert says SLPs are an "ideal solution for any investor who wants to work with a company registered in the European Union but at the same time exploit a tax-free instrument".

A spokeswoman for Law Society of Scotland insisted police and other law enforcement agencies could investigate wrong-doing by SLPs or other corporations and that money-laundering was strongly prohibited within the EU.

She said: "These business structures have been well-tested over a significant period of time and many business and enterprises use them to deliver their goods and services."