John Dobson, CEO of anti-money laundering verification platform, SmartSearch welcomes the news that the UK Government has announced plans to reform legislation governing the use of Scottish Limited Partnerships.
But suggests all sectors, even with a small risk of money laundering should also be subject to checks.
Scottish Limited Partnerships (SLPs) are currently not subject to AML checks, but unlike most investment vehicles, they have their own legal ‘personalities’ which means they can hold assets, borrow money from banks and enter into contracts in their own right.
This flexible and somewhat ‘anonymous’ structure means they are popular with legitimate businesses but also leaves them open to abuse, as John explains:
“The real owners of SLPs are able to hide their activity by not listing themselves and using foreign bank accounts. SLPs therefore offer anonymous ownership and control while giving the impression of a respectable UK business – a perfect veil for criminal activity. So perfect, in fact, that it is estimated that as many as half of all SLPs are being used to launder dirty cash”
The National Crime Agency says a “disproportionately high volume” of suspected criminal activity involves SLPs, with one money laundering scheme reportedly using more than 100 SLPs to move $80 billion out of Russia.
And Transparency International’s report ‘Offshore in the UK’ found that just five ‘frontmen’ were responsible for more than half of the 6,800 SLPs registered between January 2016 May 2017, and that half of all SLPs are registered at just 10 addresses.
John continues: “It is clear that something needed to be done, and the proposed reforms include that all those seeking to register a limited partnership have to register with an anti-money laundering supervisory body and to provide evidence of this.
“This is a very sensible move but I would go further and say that AML checks should be rolled out across the financial sector and made more stringent in areas that should already be doing comprehensive checks. For example, luxury goods retailers such as high-end cars, jewellery, antiques – any business, where large financial transactions take place, is open to abuse by money launderers.”
There is some opposition to the added cost and time needed to carry out AML checks on Scottish LPs and the same would be true of other sectors, but John says that with the latest technology, this is no longer an issue
“Carrying out money laundering checks used to be a slow, cumbersome process, with documents being checked by hand, which is why only sectors most at risk to money laundering have been subject to checks.
“But, thanks to advances in technology, electronic anti-money laundering platforms can complete AML checks and automatic sanction and PEP screening in a matter of seconds. So there is no reason why the Government shouldn’t legislate that any area that is in any way at risk to fraudulent financial activity is subject to proper AML checks.”