An analysis of all 631 Scottish companies that use opaque financial structures has revealed that only three were formed by residents of Scotland.
The Ferret examined every Scottish Limited Partnership (SLP) established last year.
SLPs are a limited partnership registered in Scotland which are used by thousands of legitimate businesses, but some have been used in money laundering scandals, prompting calls for reform.
Between 1 January 2022 and 31 December 2022, there were 1,430 limited partnerships created in the UK, and The Ferret found that 44 per cent of those were incorporated in Scotland, which makes them SLPs.
We analysed the ownership data of the SLPs and found 326 individuals and 777 corporate entities listed as partners.
Of the 326 individuals we identified, French residents are the biggest group with 82 people, followed by England with 53, Malta, 31, United States, 21, Germany, 15, Austria, 12, and Ukraine with 10.
It was not possible to determine the country of residence of 17 individuals and only three declared Scotland as their country of residence.
Responding to our findings, politicians expressed concern that Scotland continues to attract SLP investors from around the world. Alison Thewliss MP said “the fact that international money laundering is ongoing in Scotland’s capital city in plain sight should be a source of embarrassment” for the UK Government.
Our analysis of the registered addresses of the SLPs revealed that nearly 80 per cent are registered to one of three addresses in Edinburgh — 50 Lothian Road Festival Square, is the registered address of 349 partnerships.
Five South Charlotte Street and 101 Rose Street South Lane are the other two addresses prominently featured, with 102 and 26 SLPs, registered respectively.
Both these addresses have featured in previous reports by The Ferret, and one was associated with businesses linked to a gas tycoon sanctioned over the Russian invasion of Ukraine. Another was linked to hundreds of opaque partnerships, some of them named in ongoing embezzlement cases.
777 Corporations
The Ferret also found 777 corporations named as partners of these SLPs. The vast majority of them, 584, are based in the UK. However, there are other jurisdictions with significant presence: Switzerland, 159, United States, eight, Seychelles, eight, and the United Arab Emirates with five.
The NGO Tax Justice Network publishes an annual financial secrecy index which it classifies as “a ranking of jurisdictions most complicit in helping individuals to hide their finances from the rule of law.”
The US and Switzerland occupy the top two positions in the index while the UAE comes in at number eight.
In some cases, however, although Companies House lists UK corporations as being the partners of these SLPs, some are part of complex networks of companies which ultimately lead to entities based in secretive jurisdictions.
The Ferret’s analysis shows that half-measures on transparency keep the door fully open to circumventing public accountability.
Andres Knobel, a researcher at the Tax Justice Network.
Willie Rennie, the Scottish Liberal Democrat’s economy spokesperson, said: “Serious concerns have been raised about amid reports that they are marketed as tax avoidance vehicles. The fact that SLPs continue to attract investors from around the world suggests that there is a real risk that Scotland is sheltering those who do not wish to pay their fair share.”
He added: “The government should outlaw structures that are designed purely or largely to avoid tax and introduce stronger penalties for repeatedly participating in aggressive avoidance schemes.”
The SNP’s Alison Thewliss, who has campaigned against SLPs, said: “The links between SLPs and organised crime have been long established — it is by now almost a feature of how they operate. SLPs are the vehicle of choice for money launderers and those who wish to conceal their identities for other reasons.”
She added: “There have been a small number of changes through the Economic Crime Bill, currently working its way through parliament — but the UK Government is not going far enough. A key change is that the registered address must be situated in the part of the UK where the SLP is registered, but these companies are undermining efforts to increase transparency.“
“The fact that firms with links to international money laundering are operating plainly in Scotland’s capital city should be a source of embarrassment for the UK Government. It undermines those who are operating legitimate businesses and taking on personal risks to create jobs and growth in Scotland’s economy.”
Graham Barrow, an expert in due diligence and banking and co-host of the Dark Money Files podcast, said: “Whilst the level of registrations of Scottish Limited Partnerships has declined from the “heydays” of the late 2000’s, there is still a high level of new partnerships being formed from overseas with highly opaque ownership and very little in the way of reporting requirements.
“Given that reform of Companies House (which is intended to include these and other Limited Partnerships) is still some way off, the abuse of SLPs is likely to continue for a while yet.” – Barrow added.
Andres Knobel, a researcher at the Tax Justice Network, said: “As long as that laxity stays in place, those who have the means and incentive to remain hidden from public accountability can continue to do so by using layers of corporate entities to hide behind like a neverending Russian nesting doll.
“Transparency on who the real owners of registered businesses are is vital for guarding against crime, corruption and rights abuses.” Knobel added. “The Ferret’s analysis shows that half-measures on transparency keep the door fully open to circumventing public accountability.”
The UK Government did not respond to our request for comment.
Photo thanks to iStock and ronstik
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