Scottish government to challenge business vehicle used for $1bn Eastern European money laundering

The Scottish government is to challenge a legal loophole critics have said makes Scotland a target for money launderers and tax evaders, The Herald reports.

Justice Secretary Michael Matheson said he is “very open” to a review of Scottish limited partnerships (SLP) which are being advertised as business vehicles for tax avoidance in Eastern Europe.

Unlike English partnerships, SLPs need not register for tax or provide financial reports if they conduct business abroad.

Mr Matheson has confirmed he will look into the practice.

He said: “I am very open to looking at whether there is a need to improve the legislation and, if necessary, to make representations to UK ministers.

“We need to make sure that the legislation that is in place is operating as effectively as possible.”

His remarks come after it was revealed last year that SLPs were used to defraud Moldovan banks of $1 billion – with the companies registered to housing schemes.

Scottish Labour and Greens have been vocal about the problem.

Scottish Greens spokesman Andy Wightman said: “We welcome the Scottish government’s willingness to engage with this issue.

“There have been alarm bells ringing about SLPs for years and it does Scotland’s reputation no good to be associated with a legal vehicle that can so easily be abused.

“The fact that the law in this area is reserved does nothing to prevent a vigorous effort to clean one of Scotland’s dirty little secrets.”

The Scottish Law Commission called for the transfer of laws governing firms from Wesminster to Holyrood in its Smith Commission submission last year, saying: “The modernisation of the law on partnership would be a useful development in Scotland.”

A spokeswoman for Law Society of Scotland said that law enforcement could look into such practices by SLPs, adding: “These business structures have been well-tested over a significant period of time and many business and enterprises use them to deliver their goods and services.”

Last October BBC Radio 4’s File on Four programme investigated the issue and found 530 firms registered to a flat in the Pilton area of Edinburgh.