Labour
has called on the government to stage a crackdown on potential Russian money
laundering through opaque shell companies based in Scotland, after finding that
nearly 17,000 are flouting the law.
More
than half of all Scottish limited partnerships (SLPs) - structures originally
established in the early 1900s for farm holdings but now popular among private
equity firms and investors in the former eastern bloc - have not disclosed the
identity of their beneficial owners, despite new rules introduced last year.
Labour
attacked the government for failing to enforce the law, introduced in June to
force the almost 30,000 SLPs in the UK to register their ownership or face a
£500 fine for every day they are not registered. The party said the new law had
resulted in no prosecutions and up to £2.2bn in uncollected fines because
16,812 firms have been unregistered for 266 days.
Shadow
Treasury minister Anneliese Dodds said the lack of action showed the government
was soft on money laundering. “We need immediate and powerful action to stop
the flow of dirty money from Russia and elsewhere into the UK,” she said.
“Only two weeks ago we
discovered that no prosecutions had been brought forward as a result of the
2017 criminal offence for failure to prevent money laundering. This is another
advert to oligarchs and crooks that the UK is open to business due to the
Conservative government’s failure to use their powers.”
The
intervention comes as Labour attempts to put itself back on the front foot
following criticism over Jeremy Corbyn’s response to the death of Sergei
Skripal, the former Russian agent poisoned in Salisbury.
The
Labour leader had warned Theresa May against “rushing way ahead of the
evidence” after the poisoning, in what was seen as a lacklustre response to the
government’s moves against Moscow and drew criticism from Conservatives and
some of his own MPs.
The
latest move remakes the argument posed by John McDonnell, the shadow
chancellor, who told the Guardian last week he would be tougher than May on
Russia by starving “gangster politicians” of cash.
He
said Labour would “hammer” money laundering in the UK should the party come to
power, arguing a crackdown on secretive financial arrangements used in the City
of London would be a more effective weapon against Vladimir Putin’s regime than
expelling Russian diplomats.
The
use of SLP business structures have previously been found at the centre of the
“Global Laundromat”, a large-scale money laundering scheme that moved more than
$20bn (£14.2bn) out of Russia, reported by the Guardian last year.
More
than 100 SLPs were used to launder $20bn to $80bn between 2010 and 2014 in the
laundromat, while almost $3bn was channeled through shell companies based in
Glasgow in a similar scheme to move cash out of Azerbaijan into the UK to buy
luxury goods and peddle political influence throughout Europe.
The
number of SLPs used in the UK has increased rapidly in recent years following a
tightening of the law elsewhere in 2006. More than 40% of beneficial owners are
either a national of a former-Soviet country or a company incorporated there,
compared to just 0.1% for all limited companies, according to Global Witness.
Both
Labour and the SNP have applied pressure for a tougher crackdown on the use of
SLPs, which are seen as one of the main routes for filtering dirty money into
the UK and laundering it.
Ben
Wallace, minister for security and economic crime, admitted to MPs during a
debate over money laundering instigated by Labour this week that he was
concerned SLPs were “remarkably popular with countries such as Russia and
Ukraine” and said more action would be taken.
He
said the government was taking steps to make it harder for criminals to launder
money through property, jewellery and betting, adding: “Whoever the crooks are,
wherever they are from, and no matter what their nationality, we will pursue
them and their cash.”