Scottish limited partnership explained

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 criticized 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]

History

SLPs are governed by the Partnership Act 1890 and the Limited Partnerships Act 1907.[5] [6]

Prior to 2017, the ownership of SLPs was not disclosed in company filings. On 26 June 2017 regulatory changes required that SLPs disclose persons with significant control to Companies House.[7] [8] Changes to the regulations were followed by a significant drop in the number of newly registered SLPs.[9] [10]

Illicit use

SLPs have been used to launder proceeds from criminal activities worldwide, including the proceeds of a $1 billion heist of major Moldovan banks.[11] [12]

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”.[13]

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".[14]

Popularity

SLPs sharply increased in popularity between 2016 and 2017, with a 430% increase in registrations in that time.[15]

They are reportedly popular vehicles for money laundering for criminals from the former Soviet bloc.[15] 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. This requirement did not apply to partnerships in England resulted in an about a doubling of new partnership registrations there.[10]

Criticism

Transparency International UK policy director Duncan Hames has criticized SLPs, stating that "money launderers have been attracted to them because of the secrecy and the veneer of legitimacy they offer".[15] MP Alison Thewliss described their reported abuse as "an issue of significant concern for the UK Government and the authorities".[15]

Further reading

Notes and References

  1. News: Tighter rules clean up investor partnership fraud, says law firm . February 14, 2018 . Rosemary . Gallagher . . 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..
  2. News: Scottish Limited Partnerships – Scottish In Name Only . Bellingcat Investigation Team . March 2, 2018 . .
  3. News: 2018-04-29. Government announces crackdown on century-old loophole being used to launder money through UK. The Independent. 28 April 2018. Benjamin. Kentish.
  4. Book: Stefanova, Mariya . Private Equity Accounting, Investor Reporting, and Beyond: Advanced Guide for Private Equity Managers, Institutional Investors, Investment Professionals, and Students. 26 February 2015. FT Press. 978-0-13-376152-8. 6 . Scottish Limited Partnerships—While still tax transparent, unlike the English Limited Partnership, this vehicle has a separate legal personality.
  5. News: Oxfam Expert: Why there needs to be action now on Scottish Limited Partnerships . . Adrian . Doherty . August 24, 2016 . SLPs have been in existence for more than 100 years, and are governed by the Partnership Act 1890 and the Limited Partnership Act 1907..
  6. Book: Burling, Julian . Lloyd's: Law and Practice. 5 September 2013. CRC Press. 978-1-134-50143-4. 75.
  7. News: Lexology . Scottish partnerships now subject to the PSC regime . Ian . Martin . Dominic . Sedghi . Stephen . Robinson . Camilla . Barry . July 5, 2017 . https://archive.today/20180302175729/https://www.lexology.com/library/detail.aspx?g=3b7fb5a2-3df5-413d-ae09-974ecbf6026c . March 2, 2018 . dead .
  8. News: On 26 June 2017, new rules came into force which obliged SLPs to file details of their beneficial owners. . Bellingcat Investigation Team . . A Spark in the Dark – Scottish Limited Partnerships and the UK Government's Faltering Transparency Initiative . August 19, 2017 .
  9. News: A Herald analysis of SLP registrations since the announcement shows a dramatic decline in the number of new firms. . 'Tax haven' moves south of border . David . Leask . Richard . Smith . August 3, 2017 . The Herald.
  10. News: Banned Russian oligarchs exploited UK secrecy loophole . Oliver . James . Stylianou . Nassos . Dahlgreen . Will . Swann . Steve . BBC News . 4 August 2022 . 4 August 2022.
  11. News: Scottish limited partnerships 'used as cover for bank heist' . Noor . Nanji . December 26, 2017 . The National.
  12. News: Scam sparks Scots fraud haven fears . . According to the Kroll report, based on Moldovan National Bank records, the equivalent of $498m in loans was transferred to three Scottish limited partnerships. . Tim . Whewell . June 19, 2015.
  13. Web site: How a Central Asian business empire dines out on British secrecy. openDemocracy. 2019-10-01.
  14. Web site: Smash and Grab - The UK's Money Laundering Machine. 2019-10-01. bellingcat. en-GB. 2019-10-01.
  15. News: . Scots firms with business model tied to $1bn fraud probed . Dan . Vevers . January 11, 2018.
  16. Book: Erik M. Vermeulen. The Evolution of Legal Business Forms in Europe and the United States: Venture Capital, Joint Venture and Partnership Structures. 2003. Kluwer Law International. 978-90-411-2057-1. 272.
  17. Book: International and Comparative Corporate Law Journal. 2002. Kluwer Law International. xi . 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..

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