A UK Government crackdown on secret “tax haven” firms operating in Scotland may founder because of staff and budget shortages, critics have warned.

A consultation is due to launch today to close loopholes in the law regarding the use of Scottish Limited Partnerships (SLPs), often known as shell firms, which have been exploited to launder dirty foreign money.

The move comes after it was discovered that the corporate entities have been used to move $80 billion (£58bn) from Russia in only four years.

The Department for Business, Energy and Industrial Strategy (BEIS) also said just five individuals were behind thousands of SLPs registered in a period between January 2016 and the middle of May last year.

As part of an ongoing campaign, The Herald has revealed how SLPs have been extensively exploited in complex money-laundering schemes.

Under new BEIS proposals, SLP users will need to have “a real connection to the UK” and do business – or maintain an address – in Scotland to operate one.

READ MORE: Business Minister Andrew Griffiths: 'The Herald has shown the value of investigatory reporting'

They will also need to register through a company formation agent, meaning frontmen will be subjected to anti-money laundering checks. Companies House, meanwhile, will have new powers to remove limited partnerships from the register if they are dissolved or no longer operating.

The BEIS proposals would apply to all limited partnerships in the UK. But critics have warned that sufficient resources are not in place to enforce the crackdown.

Investigative journalist, Richard Smith, who has extensively covered the use and abuse of SLPs, said: “The new proposals have to be policed and at the moment, there are no resources to police them as far as I am aware. Therein lies the problem.

“They would need more staff to tackle this and more resources to enable enforcement and supervision, or it simply wouldn’t be possible to follow through on the proposals.

“Clearly they investigated and found just how vulnerable the whole trade in SLPs. They identified five frontmen who are behind half of thousands of SLPS which is amazing – five people have run riot.

“If they enforce the new rules, it should not take too long to get these things under control. But it is a question of enforcement and whether there are the budget and the resources to do this.”

But Mr Smith also said the planned crackdown should be “cautiously welcomed” and added: “It’s the result of a three-year campaign by The Herald which has involved great persistence and tenacity.”

SNP MP Alison Thewliss, who has campaigned on the SLP issue, said: “Enforcement is the key and at the moment, I don’t believe there are the staff or resources to do this.

“The biggest loophole is 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.”

The BEIS review also found SLPs had been linked to international criminal networks in Eastern Europe and had allegedly been used in arms deals. Business minister Andrew Griffiths admitted that SLPs were “being abused to carry out all manner of crimes abroad – from foreign money laundering to arms dealing”.

He said: “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.”