UK Government plans to “crack down” on the risk of Scottish Limited Partnerships being used to facilitate organised crime have been shown to consist solely of “a programme of letter writing” by Companies House at a cost of just £13,000.
According to a Freedom of Information request, over seven thousand Scottish Limited Partnerships (SLPs) – a company structure linked to criminal activity from arms deals to bribery and child pornography – have failed to comply with new UK legislation aimed at bringing them into line.
Despite threats of hefty daily fines, as of 31 January this year Companies House was still in the process of “compliance action”, which involved merely writing to those who had refused to adhere to the rules.
Though Companies House claimed “a proportion of these” SLPs could be inactive, campaigners have raised serious concerns that this could be leaving the door open to their continued use as “a UK secrecy vehicle” in major money laundering and other criminal schemes.
The revelation comes more than eight months after new rules introduced by the Department for Business, Energy and Industrial Strategy (BEIS) aimed to force 30,000 SLPs to disclose their beneficial owners within 28 days, or face daily fines of up to £500.
Meanwhile, redacted email correspondence from November and December 2017 released after FOI requests shows a lack of clarity about the role of the Scottish Government, the Crown Office and Procurator Fiscal Service (COPFS), and Police Scotland in cracking down on activity.
In January it was reported that Police Scotland had received 48 international requests to research Scottish Limited Partnerships since 2016.
In a redacted email obtained by The Ferret, a Scottish Government civil servant discusses a planned meeting between Police Scotland, the Scottish Government and Companies House staff.
It suggests that persuading the Procurator Fiscal to take action against firms they “have an interest in” was “a difficult task”.
However, Police Scotland confirmed to The Ferret that it was not carrying out any investigations as it has no jurisdiction if companies operate overseas and are involved in criminality. As a result, it has made no reports to the Crown Office and Procurator Fiscal Service.
In recent years the uniquely structured SLPs, or shell companies, have been linked to money laundering schemes worth billions from countries including those that were part of the former Soviet Union.
They were also linked to the Odebretcht corruption scandal. Investigations revealed that the Brazilian construction giant behind venues for the 2016 Olympics and 2014 World Cup infrastructure had been involved in bribery deals worth an estimated $1billion in total in more than half of the countries in Latin America, as well as in Angola and Mozambique in Africa.
Previously SLPs did not have to disclose their owners’ identities, making the structure particularly appealing to organised criminal groups.
Ben Cowdock, research officer of Transparency International UK, which has been campaigning on the issue, said Companies House was not doing enough to address the issue.
He added: “It is deeply worrying that thousands of SLPs have failed to disclose their real owners, leaving the door open to their continued use as a UK secrecy vehicle in major money laundering schemes around the world.
“Companies House must show it is serious about stopping the abuse of SLPs by fining and if necessary striking off firms which refuse to play by the rules. If it does not, the UK risks gaining a reputation as a safe haven for dirty money, stolen from some of the poorest people in the world.”
Alison Thewliss, SNP MP for Glasgow Central, agreed that action was urgently needed. “The government announced in June last year that it would force all Scottish Limited Partnerships to identify their true owners, and that failure to do so would be met with penalties. Whitehall is still silent on this, and material action it seems is unlikely any time soon.
“There must be more action taken to deal with non-compliance. Failure to do so only furthers the notion that the UK Government is happy to be viewed as a good place for shady financial dealings – a reputation it should be doing its utmost to repudiate.”
The Scottish Government claimed it had long called for the UK Government to tighten the regulatory framework around SLPs.
“This is a complex issue and we await with interest the detail of any additional new measures following the wider review into limited partnership law,” a spokesman added.
“We remain fully committed to ensuring that SLPs engaged in criminal acts and those individuals and organisations who help facilitate such activity are held accountable for their actions.”
However, a spokesman from Companies House denied it was not doing enough stating its “primary aim” was to help companies comply with the law.
“We have not yet exhausted that process,” he added. “As and when that has been completed, we will liaise with COPFS or Police Scotland about the next steps.”
A spokesperson for the Crown Office said: “Legislation has been introduced to tighten the rules governing Scottish partnerships through the commencement of the Scottish Partnerships (Register of People with Significant Control) Regulations 2017.
“COPFS will consider any prosecution report in relation to any alleged breach of the new regulations to assess if there is sufficient evidence that a criminal offence has been committed and if so will consider taking prosecutorial action having regard to the public interest.”
A spokesperson for the Department for Business, Energy and Industrial Strategy (BEIS), said: “When irregularities are identified, action is taken and information is passed onto the relevant agencies for investigation and potential prosecutions.
“The majority of Scottish Limited Partnerships are being used lawfully but we will announce further reforms in due course to ensure all limited partnerships are run responsibly.”
Additional research by Ally Tibbitt
