A UK Government minister has admitted 28,000 notorious Scottish registered “tax haven” shell firms have failed to reveal their true owners’ identities two months after strict new transparency rules came in.
The Scottish Limited Partnerships (SLP), which are officially registered to addresses in Scotland but frequently run by anonymous foreign entities, have since August faced potential £500-a-day fines unless their owners’ names are made known.
The tough new rules were established by the UK Government after The Herald published a series revelations of mass criminality involving the organisations.
Now UK Business Minister Margot James has revealed tens of thousands of them have still to comply and work is continuing to force the firms, dubbed Britain’s “home-grown secrecy vehicle”, to open their ownership.
But she added that the Crown Office, led by Lord Advocate James Wolffe QC, would be responsible for prosecuting non-compliant partnerships.
Her remarks, made in answers to questions from SNP MP and anti-corruption campaigner Alison Thewliss, suggest Scottish authorities may have to clean up the mess they believe was created by their UK counterparts.
The Conservatives, after a series of revelations about mass criminality involving SLPs in this newspaper, this summer ordered that each such firms reveal their “person of significant control”.
Ms James, in her formal written answer, to Ms Thewliss, said 28,100, the vast majority of those listed on Companies House, had failed to do so : She added: “We will continue to seek compliance from those SLPs which appear to be in operation.
“The 2017 Regulations contain a number of offences and we are working with enforcement bodies to determine the appropriate action. Prosecution is a last resort and would be taken forward by the Procurator Fiscal.”
Ms Thewliss said: “The SNP has run a sustained campaign to clamp down on harmful SLPs, which have recently proved themselves to be lucrative vehicles for international criminal activity.
“The implication that SLPs failing to comply with regulation should be prosecuted by the Crown Office serves another example of why action is needed.
“In contrast to what their name may suggest, the creation and operation of SLPs is reserved. Following the SNP campaign the UK Government launched a consultation; this closed back in March and we are yet to hear what the next steps will be.”
Duncan Hames of Transparency International said: “SLPs are a known vehicle for money laundering, enabling theft on a grand scale from whole populations. The recent move to identify the real people behind SLPs is a welcome step but this law must be enforced.
“Now we have these new rules, Companies House can begin proceedings to investigate – and if necessary strike off SLPs which do not comply. This will prevent them from causing further harm and undermining the UK’s reputation as a respectable place to do business.”
A spokeswoman for the Crown Office said: “We 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.”
The number of SLPs mushroomed over the last decade as Scottish and other company creation agents actively marketed them as “zero-tax Scottish offshore companies” in the former Soviet Union and elsewhere.
Such firms have featured in multi-billion-dollar money-laundering schemes, including the now notorious Russian and Azerbaijani Laundromats. They have also emerged as fronts for everything from corrupt arms exports to child pornography websites.
However, insiders believe it would be incredibly difficult for Scottish prosecutors to establish the true owners of such businesses, which until this year could legally remain anonymous, pay no taxes or file no accounts.
The UK Government estimate of 28,100 non-complaint SLPs in far in excess of The Herald’s estimates. We calculated that there are roughly 24,500 live SLPs at Companies House but manual records can be hard to check. Many disbanded partnerships are still showing up on Companies House website as “active”, our research found.
Only around 2000 of those live SLPs as of August had said they had a PSC who was an actual person. Three-quarters of those real “persons of significant control” were from the former Soviet Union, most frequently Ukraine, our analysis showed.
The new regulations mean that firms could face fines of £500 a day for each day they are not in compliance.
A spokesman for the Department of Business, Energy and Industrial Strategy said: “The UK has one of the most transparent and accessible company registers in the world – viewed two billion times last year – meaning company information is under constant scrutiny.
“When irregularities are identified, Companies House takes action and will be contacting all non-compliant Scottish Limited Partnerships to ensure they adhere to the new transparency requirements.
“When Scottish Limited Partnerships choose to ignore these requirements, information is passed to the relevant agencies which can lead to prosecutions.
“The Government is considering whether any further action is required to prevent limited partnerships from being used for unlawful activities.”