Government looks to reform business models in money laundering crackdown

The Government will look to reform business partnerships after new evidence suggested that certain financial instruments are being exploited by foreign money laundering schemes.

The models in question, Scottish Limited Partnerships (SLPs) and Limited Partnerships (LPs), will be reviewed as part of the Government’s crackdown on foreign money laundering.

In one particular case, it was shown that more than 100 SLPs were being used to move up to $80 billion (approximately £58.85 million) out of Russia.

The report adds that these business vehicles are also linked to international criminal networks in Eastern Europe and around the world, and have allegedly been used in arms deals.

In fact, the latest figures show that just five “frontmen” were responsible for over half of the 6,800 SLPs registered between January 2016 and mid-May 2017. By June 2017, 17,000 SLPs (around 50 per cent of all SLPS), were registered at just 10 addresses.

The reform will take place after a consultation has sought views from the industry on how SLPs can continue to be used as a legitimate vehicle for investment. This may include:

  • requiring a real connection to the UK, including ensuring SLPs do business or maintain a service address in Scotland
  • registering new SLPs through a company formation agent, meaning frontmen will be subjected to anti-money laundering checks
  • new powers for Companies House to remove limited partnerships from the company register if they are dissolved or are no longer operating

Business Minister Andrew Griffiths said: “The UK has taken a leading role in the fight against money laundering and is known internationally as a great place to work, invest and do business.

“But Scottish Limited Partnerships are being abused to carry out all manner of crimes abroad – from foreign money laundering to arms dealing.

“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.”