The government unveiled a raft of measures today to cut down on money laundering through British limited partnership companies, hot on the heels of a series of international corruption scandals which have heavily involved UK entities.
The Department of Business, Energy and Industrial Strategy (Beis) has announced a package of measures which will require limited partnerships (LPs) and Scottish limited partnerships (LLPs) to be more transparent about their operations.
The changes will force such companies – which are at the centre of major money-laundering operations including the currently-unfolding Danske Bank scandal – to demonstrate they are registered with a supervised agent, prove they conduct their business in the UK, and submit an annual confirmation statement to prove their information is up-to-date.
They also give Companies House, the UK’s business registry, the power to dissolve LPs and SLPs that are not conducting business.
LPs and SLPs have come under close scrutiny for their prominent role in a series of recent scandals, in which money was laundered through such companies – which are cheap to form, providing a layer of separation between dirty money’s source and its destination. No changes to similarly-structured limited liability partnerships (LLPs) have been introduced today, but a Beis spokesperson said they were being kept under review.
Beis said the reforms came as part of a wider review of Companies House’s powers, with a consultation planned for the new year. Critics have said the registry lacks the resources to tackle problems with such organisations.
Business minister Kelly Tolhurst said “The UK is taking strong action in the international fight against money laundering and today’s proposals will increase best practice amongst businesses.”
Duncan Hames, Director of Policy at civil society organisation Transparency International UK, said: “Transparency International UK welcomes the Government’s recognition that Limited Partnership law is in desperate need of reform. The evidence we have collected in recent years shows how urgent implementation of these proposals is. As we’ve seen with the recent scandal at Danske Bank, limited partnerships have been abused widely in money laundering on an industrial scale.”
“Implementation will be key to ensuring these proposals are effective in practice,” he added. “It’s all very well saying that those incorporating Limited Partnerships need to be subject to supervision, but in practice that means nothing if the regulators aren’t up to challenging those enabling money laundering either here or abroad. Our research has found bodies overseeing compliance with anti-money laundering rules to be opaque and ineffective. This needs to change urgently if these proposals are to be more than just words of good intent.”
Anti-financial crime expert Graham Barrow welcomed the changes, but warned some of the enforcement plans might be easier said than done.
He told City A.M. the changes would put further pressure on the already-stretched Companies House, which has around 80 agents monitoring roughly 4m listed companies for compliance failures.
“Companies House needs to have additional resources allocated as a matter of urgency”, he said, adding: “It’s pathetic that, after years of significant criticism, it is only now that the government plans to ‘consult’ on these reforms. And that against a background of chaos within the Brexit negotiations and huge amount of political uncertainty.”
“Ultimately, strict enforcement and due diligence of the current regime would probably do more to deter the money launderers and other financial criminals than any amount of tinkering around at the margins,” he said.