Government determined to prevent abuse of UK businesses for foreign money laundering

Measures designed to prevent the abuse of a specialised financial arrangement in order to launder dirty foreign money through the UK have been unveiled as part of a package of Government reforms.

Scottish Limited Partnerships (SLPs) and Limited Partnerships (LPs) are used by thousands of legitimate British businesses, particularly so those within the private equity and pensions industry, to invest more than £30 billion per annum in the UK. SLPs and LPs are business entities created by two or more partners where at least one partner is liable for what they invest. However, there’s growing evidence to suggest that SLPs have been exploited in complex money laundering schemes, including one which involved using over 100 SLPs to move up to $80 billion out of Russia. They’ve also been linked to international criminal networks in Eastern Europe and around the world, and have allegedly been used in arms deals.

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 in which to work, invest and do business. However, Scottish Limited Partnerships are being abused to carry out all manner of crimes abroad, from foreign money laundering to arms dealing. This practice simply cannot continue to go unchecked. These reforms will improve the transparency of Scottish Limited Partnerships and subject them to more stringent checks to ensure that they can continue to be used as a legitimate way for investors and pension funds to invest in the UK.”

Figures published for the launch of a Government consultation show just five front men were responsible for over half of 6,800 SLPs registered between January 2016 and mid-May 2017. By June 2017, 17,000 SLPs (ie over 50% of them) were registered at just ten addresses.

The consultation seeks views on a number of reforms to ensure SLPs can continue to be used as a legitimate vehicle for investment and enhance the UK’s world-leading business environment (itself a key part of the Government’s modern Industrial Strategy).

The proposals would make it clearer who runs limited partnerships to enable British investors to continue to use them legitimately and invest in the UK while cracking down on their use in unlawful activities. The proposals 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 that front men will be subjected to anti-money laundering checks) and new powers for Companies House to remove limited partnerships from the company register if they’re dissolved or no longer operating.

The reforms being proposed will apply to all limited partnerships in the UK and also include new annual reporting requirements for limited partnerships in England and Wales and Northern Ireland, which will help Companies House ensure they comply with the law.

Last year, the Government introduced laws requiring SLPs to report their beneficial owner and make their ownership structure more transparent, in turn witnessing an 80% reduction in the number of them being registered.

The UK is already taking a leading role on the world stage to improve corporate transparency and was recognised by Transparency International as one of only four G20 countries with the highest rating for cracking down on anonymous company ownership.

About the Author
Brian Sims BA (Hons) Hon FSyI, Editor, Risk UK (Pro-Activ Publications) Beginning his career in professional journalism at The Builder Group in March 1992, Brian was appointed Editor of Security Management Today in November 2000 having spent eight years in engineering journalism across two titles: Building Services Journal and Light & Lighting. In 2005, Brian received the BSIA Chairman’s Award for Promoting The Security Industry and, a year later, the Skills for Security Special Award for an Outstanding Contribution to the Security Business Sector. In 2008, Brian was The Security Institute’s nomination for the Association of Security Consultants’ highly prestigious Imbert Prize and, in 2013, was a nominated finalist for the Institute's George van Schalkwyk Award. An Honorary Fellow of The Security Institute, Brian serves as a Judge for the BSIA’s Security Personnel of the Year Awards and the Securitas Good Customer Award. Between 2008 and 2014, Brian pioneered the use of digital media across the security sector, including webinars and Audio Shows. Brian’s actively involved in 50-plus security groups on LinkedIn and hosts the popular Risk UK Twitter site. Brian is a frequent speaker on the conference circuit. He has organised and chaired conference programmes for both IFSEC International and ASIS International and has been published in the national media. Brian was appointed Editor of Risk UK at Pro-Activ Publications in July 2014 and as Editor of The Paper (Pro-Activ Publications' dedicated business newspaper for security professionals) in September 2015. Brian was appointed Editor of Risk Xtra at Pro-Activ Publications in May 2018.

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