15:07, September 05 514 0 theguardian.com

2017-09-05 15:07:03
Global Laundromat  The Guardian view on the Scots tax haven: a dirty little secret

The Guardian’s report on how billions of dollars were laundered by UK companies on behalf of Azerbaijan’s ruling elite is yet another example of how Scotland has come to play a role in making dirty money clean. It’s been only four years since then prime minister David Cameron told this newspaper that he would sweep away tax secrecy, yet in Scotland an anonymous and untraceable legal entity seems to have been used repeatedly to conceal the proceeds of corruption. Scottish Limited Partnerships (SLPs), originally used for managing farming tenancies, have become the vehicle of choice in particular for Russian and former Soviet “investors” looking to hide their fortunes.

Such folk may want to keep money away from soon-to-be ex-wives, dodge sanctions, launder money or evade taxes. According to Transparency International 113 SLPs played key roles in a money laundering scheme that moved between $20bn and $80bn out of Russia in just four years. The secrets of the SLP’s success are that it is a vehicle with a legal personality (so it can hold assets, borrow money from banks and enter into contracts), has minimal filing requirements, pays no tax on non-UK profits and, while registered in Scotland, can be governed by “members”, or partners, in offshore tax havens. Almost three-quarters of all SLPs registered in 2016 were controlled by anonymous companies based in tax havens. The SLPs then use bank accounts in a EU jurisdiction to transfer large sums of money.

SLPs are said to have been used as conduits for million-plus euro bribes from Azerbaijan to a former Italian politician in exchange for supporting its government over human rights abuses. This is Westminster’s domain not Holyrood’s. So far ministers have done too little, too late. True, they rushed through legislation in June that requires SLPs to name persons with significant control over them, but there’s little evidence this information will be verified. Ministers should do more. Forcing SLPs to have one registered director to be an actual person would be a start. Companies House should publish a complete data set of all members in partnerships. Publicity is a remedy for industrial diseases. Such measures will help end the murky ownership of Scottish shell companies that has facilitated financial malfeasance.