Scottish limited partnership

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]

History

SLPs are governed by the Partnership Act 1890 and the Limited Partnership Act 1907.[4][5]

On 26 June 2017 regulatory changes required that SLPs disclose persons with significant control to Companies House.[6][7] Changes to the regulations preceded a significant drop in the number of newly registred SLPs.[8]

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.[9][10]

Popularity

SLPs sharply increased in popularity between 2017 and 2016, with a 430% increase in registrations in that time.[11]

They are reportedly popular vehicles for money laundering for criminals from the former Soviet bloc.[11] Due to possessing distinct legal personalities, SLPs have been used as investment vehicles in Lloyd's of London since 1997.[12][13]

Features

Unlike other UK limited partnerships, SLPs have "legal personalities", which allow them to hold assets and enter into contracts in their own right.[11][14] The owners of SLPs were not disclosed in company filings.[11]

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.".[11] MP Alison Thewliss described their reported abuse as "an issue of significant concern for the UK Government and the authorities".[11]

References

  1. ↑ Gallagher, Rosemary (February 14, 2018). "Tighter rules clean up investor partnership fraud, says law firm". The Times. 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. ↑ Bellingcat Investigation Team (March 2, 2018). "Scottish Limited Partnerships – Scottish In Name Only". bellingcat.
  3. ↑ Kentish, Benjamin (28 April 2018). "Government announces crackdown on century-old loophole being used to launder money through UK". The Independent. Retrieved 2018-04-29.
  4. ↑ Doherty, Adrian (August 24, 2016). "Oxfam Expert: Why there needs to be action now on Scottish Limited Partnerships". Oxfam. SLPs have been in existence for more than 100 years, and are governed by the Partnership Act 1890 and the Limited Partnership Act 1907.
  5. ↑ Burling, Julian (5 September 2013). Lloyd's: Law and Practice. CRC Press. p. 75. ISBN 978-1-134-50143-4.
  6. ↑ Martin, Ian; Sedghi, Dominic; Robinson, Stephen; Barry, Camilla (July 5, 2017). "Scottish partnerships now subject to the PSC regime". Lexology. Archived from the original on March 2, 2018.
  7. ↑ Bellingcat Investigation Team (August 19, 2017). "A Spark in the Dark – Scottish Limited Partnerships and the UK Government's Faltering Transparency Initiative". bellingcat. On 26 June 2017, new rules came into force which obliged SLPs to file details of their beneficial owners.
  8. ↑ Leask, David; Smith, Richard (August 3, 2017). "'Tax haven' moves south of border". The Herald. A Herald analysis of SLP registrations since the announcement shows a dramatic decline in the number of new firms.
  9. ↑ Nanji, Noor (December 26, 2017). "Scottish limited partnerships 'used as cover for bank heist'". The National.
  10. ↑ Whewell, Tim (June 19, 2015). "Scam sparks Scots fraud haven fears". BBC News. According to the Kroll report, based on Moldovan National Bank records, the equivalent of $498m in loans was transferred to three Scottish limited partnerships.
  11. 1 2 3 4 5 6 Vevers, Dan (January 11, 2018). "Scots firms with business model tied to $1bn fraud probed". STV.
  12. ↑ Erik M. Vermeulen (2003). The Evolution of Legal Business Forms in Europe and the United States: Venture Capital, Joint Venture and Partnership Structures. Kluwer Law International. p. 272. ISBN 978-90-411-2057-1.
  13. ↑ International and Comparative Corporate Law Journal. Kluwer Law International. 2002. p. 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.
  14. ↑ Stefanova, Mariya (26 February 2015). Private Equity Accounting, Investor Reporting, and Beyond: Advanced Guide for Private Equity Managers, Institutional Investors, Investment Professionals, and Students. FT Press. p. 6. ISBN 978-0-13-376152-8. Scottish Limited Partnerships—While still tax transparent, unlike the English Limited Partnership, this vehicle has a separate legal personality
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