By Richard Smith
THREE years ago investigative journalists based across in eastern and central Europe broke a massive story about a huge money-laundering scheme.
The scheme, known as “the Global Laundromat”, extracted some $20 billion from Russia from 2010 onwards. The investigators called the it the “Laundromat”.
More than two years later we are still feeling the repercussions of the scandal, including in Scotland.
The scoop was from the Organised Crime and Corruption Reporting Project (OCCRP), a not-for-profit news organisation backed by the US State Department, originally uncovered the massive fraud.
The OCCRP, in collaboration with international media, including The Guardian and Moscow’s Novaya Gazeta, has just published a sequel to the scoop.
The total sum laundered now appears to be $80bn, not $20bn. The OCCRP has traced $7bn or so to 5,140 more international companies, with accounts at 732 banks in 96 countries.
This includes British companies and, conspicuously, Scottish Limited Partnerships (SLPs).
The firms, which are currently under review after being named in a string of stories about corruption and unethical behaviour by The Herald, allegedly channelled more than $300m to Estonia, and smaller amounts to Cyprus and Switzerland.
The one-time registered address in Glasgow of one SLP named by OCCRP
These businesses will only ever have had a virtual office in Scotland. They were created by agents in Cyprus, Ireland, Britain and Panama.
Deliberate wrongdoing cannot be imputed to any of the agents, but there has to be a question mark over how well they knew their clients.
In practice, company agents barely identifiable from scanty registration particulars have little accountability. Scottish law firms, who also create limited partnerships, usually as tax efficient vehicles for equity funds, take pride in doing due diligence of their clients.
But, as The Herald has revealed, SLPs are widely marketed overseas as off-the-peg “zero tax companies”.
But OCCRP did not just find SLPs.
British Limited Liability Partnerships (LLPs) and English Limited Partnerships, (LP) which lack the legal personality of their Scottish cousins, featured too.
SLPs, LLPs and English LP The trio are all allowed to have offshore corporate partners, which allows crooks to hide their identities behind multiple layers of overseas anonymity and they are explicitly advertised as such.
Laws could be reformed so that corporate partners and company agents are under better control.
The UK Government is considering LP law reform. That is welcome, but only part of the picture.
Perhaps more than $10bn may have flowed through British companies in this one scheme, but the whole affair is so murky, we may never find out. One SLP alone accounts for nearly $200m.
Laws could be reformed so that corporate partners and company agents are under better control. The Government is considering LP law reform. While that is welcome, it is only part of the picture.
But there may be more to wash out of the Laundromat.
After all, OCCRP and other investigators have still to detail $73bn of the $80bn scandal.
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