A Scottish limited partnership (SLP) is a form of limited partnership registered under Scots law. SLPs have features that give them advantages as investment vehicles and have been criticized for having inadequate anti-money laundering rules.[1][2][3] Unlike other UK limited partnerships, SLPs have legal personality, which allows them to hold assets and enter into contracts in their own right.[4][5]
History
editSLPs are governed by the Partnership Act 1890 and the Limited Partnerships Act 1907.[6][7]
Prior to 2017, the ownership of SLPs was not disclosed in company filings.[4] On 26 June 2017 regulatory changes required that SLPs disclose persons with significant control to Companies House.[8][9] Changes to the regulations were followed by a significant drop in the number of newly registered SLPs.[10][11]
Illicit use
editSLPs have been used to launder proceeds from criminal activities worldwide, including the proceeds of a $1 billion heist of major Moldovan banks.[12][13]
According to Transparency International, “these superficial companies have enabled theft, bribery and organised crime to thrive around the world under the veneer of a legitimate UK enterprise”.[14]
The investigative website Bellingcat "found SLPs trading in high-risk money laundering areas, operating unregulated trading and gambling websites, a large proportion of identifiable SLPs in business as trade intermediaries... SLPs appearing in the Ukrainian criminal courts, generic websites with no clear details of their trading activities... SLPs for sale online as shelf companies, SLPs involved in political lobbying, and others more directly involved in large scale criminal activity".[15]
Popularity
edit
SLPs sharply increased in popularity between 2016 and 2017, with a 430% increase in registrations in that time.[4]
They are reportedly popular vehicles for money laundering for criminals from the former Soviet bloc.[4] Due to possessing distinct legal personalities, SLPs have been used as investment vehicles in Lloyd's of London since 1997.[16][17]
The requirement to file persons-with-significant-control documents from 2017 led to a large drop in the number of new registrations.[15] This requirement did not apply to partnerships in England resulted in an about a doubling of new partnership registrations there.[11]
Criticism
editTransparency International UK policy director Duncan Hames has criticized SLPs, stating that "money launderers have been attracted to them because of the secrecy and the veneer of legitimacy they offer".[4] MP Alison Thewliss described their reported abuse as "an issue of significant concern for the UK Government and the authorities".[4]
References
edit- ^ Gallagher, Rosemary (February 14, 2018). "Tighter rules clean up investor partnership fraud, says law firm". The Times.
SLPs are a legitimate investment vehicle but they have become the centre of controversy over their possible involvement in alleged criminal activities. They have been criticised for failing to meet money-laundering prevention rules, which has led to accusations of international fraud.
- ^ Bellingcat Investigation Team (March 2, 2018). "Scottish Limited Partnerships – Scottish In Name Only". bellingcat.
- ^ Kentish, Benjamin (28 April 2018). "Government announces crackdown on century-old loophole being used to launder money through UK". The Independent. Retrieved 2018-04-29.
- ^ a b c d e f Vevers, Dan (January 11, 2018). "Scots firms with business model tied to $1bn fraud probed". STV.
- ^ Stefanova, Mariya (26 February 2015). Private Equity Accounting, Investor Reporting, and Beyond: Advanced Guide for Private Equity Managers, Institutional Investors, Investment Professionals, and Students. FT Press. p. 6. ISBN 978-0-13-376152-8.
Scottish Limited Partnerships—While still tax transparent, unlike the English Limited Partnership, this vehicle has a separate legal personality
- ^ Doherty, Adrian (August 24, 2016). "Oxfam Expert: Why there needs to be action now on Scottish Limited Partnerships". Oxfam.
SLPs have been in existence for more than 100 years, and are governed by the Partnership Act 1890 and the Limited Partnership Act 1907.
- ^ Burling, Julian (5 September 2013). Lloyd's: Law and Practice. CRC Press. p. 75. ISBN 978-1-134-50143-4.
- ^ Martin, Ian; Sedghi, Dominic; Robinson, Stephen; Barry, Camilla (July 5, 2017). "Scottish partnerships now subject to the PSC regime". Lexology. Archived from the original on March 2, 2018.
- ^ Bellingcat Investigation Team (August 19, 2017). "A Spark in the Dark – Scottish Limited Partnerships and the UK Government's Faltering Transparency Initiative". bellingcat.
On 26 June 2017, new rules came into force which obliged SLPs to file details of their beneficial owners.
- ^ Leask, David; Smith, Richard (August 3, 2017). "'Tax haven' moves south of border". The Herald.
A Herald analysis of SLP registrations since the announcement shows a dramatic decline in the number of new firms.
- ^ a b Oliver, James; Stylianou, Nassos; Dahlgreen, Will; Swann, Steve (4 August 2022). "Banned Russian oligarchs exploited UK secrecy loophole". BBC News. Retrieved 4 August 2022.
- ^ Nanji, Noor (December 26, 2017). "Scottish limited partnerships 'used as cover for bank heist'". The National.
- ^ Whewell, Tim (June 19, 2015). "Scam sparks Scots fraud haven fears". BBC News.
According to the Kroll report, based on Moldovan National Bank records, the equivalent of $498m in loans was transferred to three Scottish limited partnerships.
- ^ "How a Central Asian business empire dines out on British secrecy". openDemocracy. Retrieved 2019-10-01.
- ^ a b "Smash and Grab - The UK's Money Laundering Machine". bellingcat. 2019-10-01. Retrieved 2019-10-01.
- ^ Erik M. Vermeulen (2003). The Evolution of Legal Business Forms in Europe and the United States: Venture Capital, Joint Venture and Partnership Structures. Kluwer Law International. p. 272. ISBN 978-90-411-2057-1.
- ^ International and Comparative Corporate Law Journal. Kluwer Law International. 2002. p. xi.
It is interesting to note that due to their separate personality, Scottish limited partnerships have also been used as vehicles for investment in Lloyds since 1997.