Fears grow over Scottish firms used for money-laundering in former Soviet Union

Concerns have been growing for more than a year over controversial limited partnerships - a unique Scottish corporate structure used in the elaborate looting of $1bn from Moldovan banks in 2014.

Now it has emerged that such shell firms - advertised as "Scottish zero-tax offshore companies" - are being marketed across the European Union complete with official UK Government documentation that enables their owners to open bank accounts.

At least a dozen agencies in Latvia, Ukraine and Russia are selling Scottish limited partnerships (SLPs) along with Certificates of Good Standing, essentially references from Britain's Companies House confirming that the SLPs are bona fide. Such papers are then used to secure bank accounts in, say, Riga, Latvia, or Nicosia, Cyprus.

Picture: Riga

Russian-language adverts seen by The Herald show such certificates being offered for a price of 350 euros - on top of one-off payments of 1700 euros for an off-the-shelf SLP, typically registered in a virtual office or private flat somewhere in Scotland.

Green MSP Andy Wightman has campaigned for reform of SLPs. He said: "These revelations are further proof that Scottish Limited Partnerships are now the vehicle of choice for a growing number of criminal enterprises.

"The ease with which they can be registered and exploited for nefarious purposes such as money-laundering emphasises how urgently the Scottish and UK governments should be dealing with this issue."

Crucially, the use of an SLP and a bank account in an EU country allows former Soviet "investors" the ability to bypass so-called blacklisted tax havens. Several former USSR states have banned direct contact with offshore zones. However, an SLP enables them to deal indirectly with jurisdictions such as Belize and Panama. That is because SLPs while registered in Scotland are often owned by "members", or partners, in the Caribbean. So the SLP is used to provide a financial bridge between the former Soviet Union and tax havens by, nominally, provided a corporate based in the respectable European Union jurisdiction. That SLP then opens doors to a bank account in another EU jurisdiction. However, the SLP does not need to publish financial accounts if it does not business in Scotland, meaning it effectively enjoys the secrecy and tax advantages of its offshore parent companies.

News of certificates of good standing being sold in the ex-USSR came shortly after MPs warned that Britain's property market was being used to launder billions of pounds. The Home Affairs Committee said the UK had "laid out the welcome mat" to launderers thanks to its lax controls over property ownership.

Andy Wightman

Mr Wightman has sought reforms to property law to restrict the use of UK property by offshore entities, as well as SLPs.

He said: "The UK Parliament Home Affairs Committee has revealed that at least £100 billion is being laundered through the UK every year. I have written to the Justice Secretary, Michael Matheson to ask him for an assurance that he is doing all in his power to tackle this issue including reviewing the criminal law in this area and working closely with the UK Government to reform Limited Partnership law."

Scottish authorities have stressed that corporate law is reserved, despite the fact that SLPs only exist in Scotland thanks to obscure 1907 legislation. Labour, SNP and Green politicians have all expressed concerns about such firms.

Do you know of a Scottish business or property owned in an overseas tax haven? Or of a Scottish company used as a vehicle to avoid tax overseas? Then please contact me, David Leask, at david.leask@theherald.co.uk