UK : Government to tackle foreign money laundering

Ministers have announced plans to clamp down on a century-old business loophole that they say is being used by foreign criminals to launder dirty money through the UK.

The government said Scottish Limited Partnerships (SLPs), which were introduced in 1907 to help Scottish farmers, are being exploited by overseas criminal gangs.

One laundering scheme used 100 SLPs to shift $80bn in Russian money in just four years, according to government research.

The proposals are the latest in ministers’ attempts to crack down on dirty money as part of a wide-ranging response to Russia in the wake of the Salisbury nerve agent attack.

Under plans designed to ensure SLPs are being used only by legitimate businesses, users will have to prove they have a genuine connection to the UK and are running a company or maintaining an address in Scotland. Under the current rules, anyone in the world is able to register an SLP.

The changes being put to consultation by the Department for Business, Energy, and Industrial Strategy will also mean anyone setting up a limited partnership will have to pass anti-money laundering checks.

While many SLPs are owned by legitimate businesses, government research suggests others have been part of complex attempts to launder the proceeds of criminal activities.

One scheme is reported to have used 100 different SLPs to move $80bn out of Russia, while other partnerships were found to have been exploited by international criminal networks based in Eastern Europe and used in arms deals.

Announcing the changes, 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.

How is money laundering done through property?

“But as we are seeing especially with Scottish Limited Partnerships, is that they 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.”

The government has taken a number of steps to stem the flow of dirty money through the UK. Laws due to be introduced this summer will establish a public register of foreign-owned property, while law enforcement agencies have already been given greater powers to identity and recover dirty money.

“Unexplained wealth orders” have also been introduced to compel people suspected of laundering money to prove the source of their earnings.

Ministers believe that cutting the amount of laundered money in the UK is one way to reduce Russian influence amid ongoing tensions following the poisoning of former MI6 spy Sergei Skripal and his daughter Yulia in Salisbury

According to Transparency International, £4.4bn worth of properties in the UK were purchased with criminal money, and more than one in five of these were owned by Russians.

Minsters have already tightened the regulation of SLPs. Last year, new laws were introduced requiring users to declare who owned the partnership and publish more details about the ownership structure. The government said this resulted in a 80 per cent drop in the number of new SLPs.

The latest changes will apply to all limited partnerships in the UK. Scottish limited partnerships give users more powers than standard limited partnerships, such as the ability to take on debts or own property in the name of the partnership.

Last month, the Scottish National Party (SNP) urged ministers to stop SLPs being used for criminal purposes.

Glasgow Central MP Alison Thewliss said: “The Sanctions and Anti Money-Laundering Bill currently going through parliament is an opportunity for the UK Government to crack down on the scourge of Russian money laundering via Scottish Limited Partnerships and similar structures in England." - The Independent