Alister Jack vows to tackle abuse of Scottish Limited Partnerships

There’s long been concern over the misuse of the SLPs which were originally intended for farmers in the early 1900s. 

Unlike traditional partnerships, which require two named partners, SLPs have a legal personality, which means they can enter into contracts, take on debts and own property.

They have relatively low reporting requirements and can ultimately be controlled by corporate partners, which, if they're based in places such as the Seychelles and Belize, means the ultimate beneficial owner can be anonymous. 

The lack of transparency means they’ve become popular with money launderers, and they played an integral part in the “Russian Laundromat”, that moved more than $20 billion out of Russia between 2010 and 2014 through global banks.

Reforms in recent years have required businesses to declare the ultimate person of control, but it is still possible to keep the beneficial owner hidden.

During Scottish Questions in the Commons, Labour’s Ian Murray asked the government to look again at reforming how businesses can set up and register in the UK. 

He told MPs: “One of the most important ways to clamp down on illicit Russian money and influence in the UK is through reform of Companies House. Despite Labour's attempts, the Economic Crime Bill does not contain such reforms. 

“It's important because Scottish limited partnerships that were set up for Scottish farmers in the 19th century remain an outdated and opaque vehicle of ownership, which have been used in the 21st century to obscure beneficial ownership. 

“There is widespread support for this change and the government refused to act”. 

He asked Secretary of State for Scotland Alister Jack to commit to reforming SLPs and wider company law. 

Mr Jack told his Labour shadow there would be an updated Economic Crime Bill in the next session of parliament which would include “further measures” on SLPs. 

“He's absolutely right,” the Tory minister said, “Those were being used by foreign individuals and foreign companies to launder money. We know that. The reforms in 2018 increased transparency and they put more stringent checks on the individuals who were forming those companies. But yes, hopefully with the support from the Labour Party, we will tackle this in the next session of parliament."

Speaking after the session, Mr Murray said: “These outdated vehicles have been used for far too long to hide and obscure ownership.

“Labour has repeatedly pushed the government to take action on this, including in the Economic Crime Bill which recently passed through Parliament.

“It shouldn’t have taken the barbaric invasion of Ukraine for the government to act. It is critical the government holds to this commitment, and reforms outdated Scottish Limited Partnerships once and for all.”

The SNP’s Alison Thewliss, who has long campaigned for the reform of SLPs said any reform must be brought before parliament urgently. 

Ms Thewliss said: “The UK Government’s reforms don’t go far enough as things stand, and the rules which currently apply to Scottish Limited Partnerships are just not being enforced.

"They have known about abuses such as bribery, corruption, and arms dealing for years and have done little to address them. 

“The UK Government must bring forward urgent reforms to Companies House to ensure that they can verify the information being entered into the register and prevent further abuse of Scottish Limited Partnerships.”

During the Commons session, Mr Murray also criticised the new register of overseas entities in the Economic Crime Bill, which will require foreign owners of property in the UK to declare their true identity, as, in Scotland, it only applies retrospectively to property bought by overseas owners since December 2014.

In England, it will go back 20 years.

Mr Murray said this effectively created a “smugglers cove” in Scotland. 

“So, if you’ve laundered Putin’s dirty money in Scotland before 2014 you’re in the clear,” he said.

“For example, Perthshire’s Aberuchill Castle, bought by Russian steel magnate Vladimir Lisin for over £5 million in 2005, who is on the Treasury’s watchlist since 2008, is not covered.

“Vladimir Romanov, who bought Heart of Midlothian Football Club in 2005 and swathes of central Edinburgh, and is allegedly hiding in Moscow under the protection of Putin, would not have been covered either.

“But they would in England.”

Mr Jack said going back before 2014 risked third parties who didn’t know they were engaging with an overseas entity that was non-compliant being hurt. 

“So that’s the reason we haven’t gone back before 2014 and the joint committee that reviewed the draft legislation did agree with that point, but I absolutely have every sympathy with the points he makes,” the minister said.