Scottish shell companies are being used as fronts for unregulated and unlicensed international financial gambling sites widely condemned as internet scams.

Firms formally registered in Glasgow, Edinburgh and elsewhere are given as contacts for so-called "binary options" websites where punters make fixed-odd bets on financial markets.

International watchdogs, including Britain's Financial Conduct Authority, have issued blanket warnings about such internet sites in recent weeks amid concerns that consumers are losing "substantial sums of money" in high-risk bets.

READ MORE: ‘Scotland has become a money-laundering factory for Soviet criminal gun-runners’

A Herald investigation has found some binary options websites are trading using controversial Scottish limited partnerships or SLPs, a kind widely marketed in eastern Europe as zero-tax "offshore companies", or other Scottish shell firms.

The Scottish Government last week formally asked the UK Government to close an Edwardian loophole that allows SLPs to be exploited by international organised criminals effectively as secretive tax havens inside the EU.

The Sunday Herald revealed a Mafia monitoring group in Ukraine has warned Scottish shell firms are proving particularly attractive to gun-runners in the former Soviet Union.

Green MSP Ross Greer, asked to comment on the links between binary options sites and SLPs, said: "These latest allegations of unethical behaviour underline the need for action to make Scottish limited partnerships transparent. There must be penalties for illegitimate transactions.”

SNP, Labour and Liberal Democrat figures have all warned about SLPs being exploited. 

How Sunday Herald covered former Soviet mafia links


Meanwhile, binary options traders identified by The Herald as having links to Scottish shell companies include three websites blacklisted by France's financial regulator, the AMF, this summer.

The AMF warned that it could not find any authorised investment services provider for the sites Finpari, Barclays Traders and Solution-Capital.

READ MORE: ‘Scotland has become a money-laundering factory for Soviet criminal gun-runners’

Finpari - the word "pari" means "wager" in Russian - offers to double the stakes of gamblers willing to "invest" $3000 on bets on whether certain financial indicators will go up or down.

Such "bonus" schemes have been criticised by whistleblowers because they are used to lock players in to trading.

Finpari's site claims the average daily income of its clients is just under $1000. Its website, which comes in English, Russian, French, Spanish, Thai, Chinese and Arabic versions, gives phone numbers in London, Moscow, Hong Kong and elsewhere.

However, recently removed small print on its site showed its ownership as two firms, Lerona Impex SA in the tax haven of the Seychelles and an SLP, Norske Inter.

The SLP was registered last year at an accountant's firm in Aberdeen's Dee Street but its partners are both in another more classic fiscal paradise, Belize.

Barclays Traders offers binary options, from a base in St Vincent in the West Indies, according to its site. The business cites, however, a Scottish company on its site, Skyline Products Services Limited. This firm, incorporated this year, has a sole director, a 29-year-old Serbian, and is registered at the Blue Square virtual office in Glasgow's Bath Street.

READ MORE: ‘Scotland has become a money-laundering factory for Soviet criminal gun-runners’

Solution-Capital's site claims it "provides investors with high returns up to 75-85 per cent if the option is in-the-money". The business says online investors - it does not use the word gamblers - can trade binary options in stocks, currencies and commodities 24 hours a day, six days a week. 

Its investors enter in to an agreement with a business called OPA Ltd in the St Vincent and the Grenadines Islands in the Caribbean. It says billing is done by a Scottish limited company called OPA Services Ltd, whose sole director is a 32-year-old Serbian who gives a Belgrade address. OPA Services Ltd, which was incorporated earlier this year, uses the same virtual office as Skyline Products Services Limited in Glasgow's Bath Street. Solution Capital's website, however, suggests it is based at the prestigious Canada Square in London's Canary Wharf.

The Herald wrote to all three websites but has not received a reply. Binary options trading sites have mushroomed globally in the last year. We have identified at least two more such sites trading under a front that is an SLP.

There are growing international concerns over binary options trading sites cropping up on the world wide web, often with offshore tax haven addresses.

The FCA has stressed there is no law under which such businesses can be licensed as investment services in the UK. It says they should get licences from Britain's gaming authorities. They do not do so.

Belgium is banning them this week. 

READ MORE: ‘Scotland has become a money-laundering factory for Soviet criminal gun-runners’

Israeli ministers this month called for a full parliamentary inquiry into the binary options business, much of which appears to be based in Tel Aviv.

In a major investigation, online newspaper The Times of Israel earlier this year revealed the scale of the industry, including a revelation that multi-lingual call centre staff were told to tell would-be investors that they had previously worked for the Bank of Scotland.

The FCA last month in a formal warning on binary options trading said: "Unfortunately, many of the reports we have received are from consumers who have dealt with fraudulent binary options firms that have no regulatory status either with the FCA, Gambling Commission or other EEA or non-EEA regulators. 

"Most consumers describe having lost substantial sums of money. While this might be expected given the high risk win or lose nature of the activity, we are particularly concerned about the experiences many consumers report to us when trying to deal with unauthorised or unlicensed binary options firms. We regularly hear about such firms suddenly closing consumers’ trading accounts, refusing to pay back their funds and ceasing any further contact with the consumer.

"Fraudulent firms operating in the binary options market without the necessary authorisations or licenses tend to be based outside the UK yet often claiming to have some kind of presence here, often at prestigious City of London addresses."