THERESA May’s Government has announced a crackdown on Scottish-based shell companies that have been used to launder dirty money by foreign criminals.

The UK Government is to consult on closing a series of “loopholes” in Scottish Limited Partnerships (SLP), which are widely believed to have been abused on a global scale.

SLPs are a 100-year-old business entity rooted in UK rather than Scottish law. They are formed by at least two partners and can enter into contracts and take on debts.

Although they were originally designed to benefit Scottish farmers, SLPs have been exposed as the vehicle for moving money anonymously through tax havens.

It has been alleged that Russian President Vladimir Putin and his associates may have used SLPs to bypass Western sanctions and that $80 billion has been moved from Russia in this way in just four years.

A UK Government consultation, launched today, will seek views on a suite of possible reforms to ensure that SLPs can be used as a legitimate vehicle for investment.

The aim of the proposals is to make it clearer who runs limited partnerships, while also clamping down down on their link to unlawful activities.

These include:

  • requiring a real connection to the UK, including ensuring SLPs do business or maintain a service address in Scotland;
  • registering new SLPs through a company formation agent, meaning frontmen will be subjected to anti-money laundering checks;
  • new powers for Companies House to remove limited partnerships from the company register if they are dissolved or are no longer operating.

Business Minister Andrew Griffiths said:

“The UK has taken a leading role in the fight against money laundering and is known internationally as a great place to work, invest and do business.

“But as we are seeing especially with Scottish Limited Partnerships, is that they are being abused to carry out all manner of crimes abroad – from foreign money laundering to arms dealing.

“This simply cannot continue to go unchecked and these reforms will improve their transparency and subject them to more stringent checks to ensure they can continue to be used as a legitimate way for investors and pension funds to invest in the UK.”

SNP MP Alison Thewliss, who has campaigned on the SLP issue, said:

“I welcome the news that the UK Goverment, after a gap of over a year, are finally getting round to publishing the results of their consultation on Scottish Limited Partnerships. I can only wonder at how much dirty money has been laundered through SLPs during this time.

“The SNP awaits the full detail of the actions the UK Government are prepared to take, but I remain concerned that this will not go far enough to tackle money laundering on our doorstep. To weed out those abusing SLPs from legitimate businesses, SLPs must be tied to a real UK person, with a UK bank account. They must file accounts like other businesses, and they must be transparent and accountable.

“The biggest loophole remains at Companies House, a UK Government agency who are not held even to the same anti-money laundering checks as company formation agents. Without the powers, staff and resources to make verification checks and pursue dubious companies, Companies House will continue to leave the door wide open to dodgy business. Since the move to tighten up rules on Persons of Significant Control, I understand there have still been no fines levied for non-compliance. New rules are pretty much meaningless without stringent enforcement behind them.