Leaked: plans for SLP crackdown

Under pressure from anti-corruption campaigners, the Conservatives in Westminster this spring launched a consultation on reforms dubbed “too little, too late” by the SNP.

Now a letter from Business Secretary Greg Clark confirms the British Government will next year seek to introduce measures understood to be opposed by key voices both in the City of London and the Scottish legal establishment.

Crucially, Mr Clark suggested that he would also move to tighten rules around other UK partnerships which, like SLPs, have been linked to some of the biggest laundering scandals ever uncovered.

“There has been growing concern in recent years that limited partnerships, and in particular their Scottish form (Scottish limited partnerships), are being used for illicit purposes,” Mr Clark’s letter said, according to The Financial Times.

The paper reported that proposed measures would include forcing a partnership to maintain some sort of link in the UK. It did not elaborate on this point. Campaigners believe that SLPs would be harder to abuse if there was an accountable person who answered for any illegal conduct overseas.

The FT also said proposed legislation was also likely to enable the striking off of SLPs. As things stand nobody can even be entirely sure how many SLPs are active. That is because a dissolved partnership can be re-activated in a way that would be impossible for a limited company.

The Department of Business, Energy and Industrial Strategy said it did not comment on leaks.

The FT linked government moves with a money-laundering scandal at the Estonian branch of Danske Bank. This saw billions of dollars pumped through shell companies - with unnamed British ones ranking second only to those from Russia.

SLPs have proved more popular than some equivalent English or Northern Irish entities because they have legal personality.

But like other shell firms registered in the UK they essentially act as a respectable EU-based front for untraceable money transfers. Many have had accounts at banks in the Baltic states, such as Estonia.

A crackdown in that region has seen hundreds of SLPs lose their accounts, including in Latvia’s Rietumu banka, an institution part owned by Celtic owner Dermot Desmond.

Latvian authorities, argue insiders sceptical about Britain’s commitment to transparency, have now done more to stop abuse of SLPs than British ones. More than half of the offshore companies with accounts in its banks were found to be from the UK or its overseas territories.

The country’s ambassador to the UK, Baiba Braže, told The Herald the time had come for other nations to act. She said: “We do think the clean up act has to be done not only in Latvia but elsewhere. There are a lot of things that the UK can do.”

She added: “When some of the money-laundering channels were looked in to, almost all of the trends went back to the UK.

“Almost none of the money laundering was created or came from Latvian banks. It all came via companies in London or the Virgin Islands, or Scottish limited partnerships.”

Ms Braže acknowledged that Latvia had been on a “gradual learning process” on offshore companies using its banks.

UK authorities have also been slow, say critics. It is three and a half years since The Herald revealed SLPs were being openly marketed as secrecy vehicles - along with Baltic bank accounts.

Previous reforms have yet to have an impact. There have been no prosecutions of thousands of SLPs who breach minimal transparency regulations introduced in 2017.

Money-laundering expert Graham Barrow told the FT: “We should applaud the government for taking this action and it is moving in the right direction but ultimately it will succeed or fail based on the resources given to Companies House. If Companies House does not have the right resources, the rules will be circumvented by criminals - as they have been.”