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 criticised 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]
SLPs 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]
SLPs 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]
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]
Transparency International UK policy director Duncan Hames has criticised 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]
Money laundering is the process of illegally concealing the origin of money obtained from illicit activities such as drug trafficking, underground sex work, terrorism, corruption, embezzlement, and treason, and converting the funds into a seemingly legitimate source, usually through a front organization. Money laundering is ipso facto illegal; the acts generating the money almost always are themselves criminal in some way. As financial crime has become more complex and financial intelligence is more important in combating international crime and terrorism, money laundering has become a prominent political, economic, and legal debate. Most countries implement some anti-money-laundering measures.
Kleptocracy, also referred to as thievocracy, is a government whose corrupt leaders (kleptocrats) use political power to expropriate the wealth of the people and land they govern, typically by embezzling or misappropriating government funds at the expense of the wider population. One feature of political-based socioeconomic thievery is that there is often no public announcement explaining or apologizing for misappropriations, nor any legal charges or punishment levied against the offenders.
The Financial Crimes Enforcement Network (FinCEN) is a bureau within the United States Department of the Treasury that collects and analyzes information about financial transactions to combat domestic and international money laundering, terrorist financing, and other financial crimes.
Banking in Switzerland dates to the early 18th century through Switzerland's merchant trade and over the centuries has grown into a complex and regulated international industry. Banking is seen as emblematic of Switzerland and the country has been one of the largest offshore financial centers and tax havens in the world since the mid-20th century, with a long history of banking secrecy and client confidentiality reaching back to the early 1700s. Starting as a way to protect wealthy European banking interests, Swiss banking secrecy was codified in 1934 with the passage of a landmark federal law, the Federal Act on Banks and Savings Banks. These laws were used to protect assets of persons being persecuted by Nazi authorities but have also been used by people and institutions seeking to illegally evade taxes, hide assets, or to commit other financial crime.
An offshore bank is a bank that is operated and regulated under international banking license, which usually prohibits the bank from establishing any business activities in the jurisdiction of establishment. Due to less regulation and transparency, accounts with offshore banks were often used to hide undeclared income. Since the 1980s, jurisdictions that provide financial services to nonresidents on a big scale can be referred to as offshore financial centres. OFCs often also levy little or no corporation tax and/or personal income and high direct taxes such as duty, making the cost of living high.
A shell corporation is a company or corporation with no significant assets or operations often formed to obtain financing before beginning business. Shell companies were primarily vehicles for lawfully hiding the identity of their beneficial owners, and this is still the defining feature of shell companies due to the loopholes in the global corporate transparency initiatives. It may hold passive investments or be the registered owner of assets, such as intellectual property, or ships. Shell companies may be registered to the address of a company that provides a service setting up shell companies, and which may act as the agent for receipt of legal correspondence. The company may serve as a vehicle for business transactions without itself having any significant assets or operations.
A limited partnership (LP) is a type of partnership with general partners who have a right to manage the business and limited partners who have no right to manage the business but have only limited liability for its debts. Limited partnerships are distinct from limited liability partnerships, in which all partners have limited liability.
Offshore investment is the keeping of money in a jurisdiction other than one's country of residence. Offshore jurisdictions are used to pay less tax in many countries by large and small-scale investors. Poorly regulated offshore domiciles have served historically as havens for tax evasion, money laundering, or to conceal or protect illegally acquired money from law enforcement in the investor's country. However, the modern, well-regulated offshore centres allow legitimate investors to take advantage of higher rates of return or lower rates of tax on that return offered by operating via such domiciles. The advantage to offshore investment is that such operations are both legal and less costly than those offered in the investor's country—or "onshore".
In domestic and international commercial law, a beneficial owner is a natural person or persons who ultimately owns or controls an interest in a legal entity or arrangement, such as a company, a trust, or a foundation. Legal owners, commonly described as the "registered owners", may hold those interests as beneficial owners or for the benefit of someone else, in which case they may be described as a "nominee".
The chief compliance officer (CCO) is a corporate executive within the C-suite responsible for overseeing and managing regulatory compliance issues within an organization. The CCO typically reports to the chief executive officer or the chief legal officer.
Financial crime is crime committed against property, involving the unlawful conversion of the ownership of property to one's own personal use and benefit. Financial crimes may involve fraud ; theft; scams or confidence tricks; tax evasion; bribery; sedition; embezzlement; identity theft; money laundering; and forgery and counterfeiting, including the production of counterfeit money and consumer goods.
Crime in Switzerland is combated mainly by cantonal police. The Federal Office of Police investigates organised crime, money laundering and terrorism.
The institutional corruption in Angola refers to the pervasive and long-standing issue of corruption within the country's government and public institutions. The aftermath of the 30-year civil war and the influence of the Soviet command economy have resulted in significant institutional damage and the emergence of a centralized government with authoritarian tendencies. This has allowed the president and his associates to exert control over the nation's resources, enabling them to exploit the economy for personal gain through legal and extra-legal means.
An offshore financial centre (OFC) is defined as a "country or jurisdiction that provides financial services to nonresidents on a scale that is incommensurate with the size and the financing of its domestic economy."
The National Crime Agency (NCA) is a national law enforcement agency in the United Kingdom. It is the UK's lead agency against organised crime; human, weapon and drug trafficking; cybercrime; and economic crime that goes across regional and international borders, but it can be tasked to investigate any crime. The NCA has a strategic role as part of which it looks at serious crime in aggregate across the UK, especially analysing how organised criminals are operating and how they can be disrupted. To do this, it works closely with regional organised crime units (ROCUs), local police forces, and other government departments and agencies.
Banking secrecy, alternatively known as financial privacy, banking discretion, or bank safety, is a conditional agreement between a bank and its clients that all foregoing activities remain secure, confidential, and private. Most often associated with banking in Switzerland, banking secrecy is prevalent in Luxembourg, Monaco, Hong Kong, Singapore, Ireland, and Lebanon, among other off-shore banking institutions.
Corruption in Switzerland describes the prevention and occurrence of corruption in Switzerland.
A Special Limited Partnership or SLP is the Luxembourg version of the similar British Limited Partnership.
The Republic of Panama is one of the oldest and best-known tax havens in the Caribbean, as well as one of the most established in the region. Panama has had a reputation for tax avoidance since the early 20th century, and Panama has been cited repeatedly in recent years as a jurisdiction which does not cooperate with international tax transparency initiatives.
While corruption in Andorra is not as widespread as in the cases of other countries, key issues remain in the principality. These include corrupt practices related to financial regulations and Andorra's financial system. Due to the Andorran banking secrecy law, the country became an attractive destination for illicit funds, fraud, and money laundering.
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.
Scottish Limited Partnerships—While still tax transparent, unlike the English Limited Partnership, this vehicle has a separate legal personality
SLPs have been in existence for more than 100 years, and are governed by the Partnership Act 1890 and the Limited Partnership Act 1907.
On 26 June 2017, new rules came into force which obliged SLPs to file details of their beneficial owners.
A Herald analysis of SLP registrations since the announcement shows a dramatic decline in the number of new firms.
According to the Kroll report, based on Moldovan National Bank records, the equivalent of $498m in loans was transferred to three Scottish limited partnerships.
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.