The Dark Money Files
The Dark Money Files
Laundromats and Legal Entities - part three: Scottish Limited Partnerships
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The one you've all been waiting for! A detailed explanation of SLPs, their history, construction and how they are used to launder money - plus a further explanation of a Scottish Limited Partnership complex structure to show how they are evolving in the light of continued public exposure.
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spk_0: 0:02
wake
spk_1: 0:14
up to the fifth episode of Season two of the Dark Money files, which we shine a light into a murky world. I'm right, like and with me is my co host friend and business partner, Grand Barrow. Hello, Graham
spk_0: 0:26
High, right?
spk_1: 0:28
Ah, this is the big one. That grime.
spk_0: 0:31
Well, judging from the debate, right, I think arrived.
spk_1: 0:34
Whoever thought that a longstanding and pretty obscure Scottish legal entity would end up playing such a major part in the world of financial crime
spk_0: 0:42
I agree on. It's so obscure and it's played such a significant role globally. I think we need to go back to the very beginning and explain it in detail.
spk_1: 0:51
Well, back to 1907
spk_0: 0:53
Well, not literally, Ray. I think time travel is beyond even us.
spk_1: 0:57
No, Graham, Not literally. As obviously you knew. I mean that we should start the conversation with the 1907 partnership pact or technically, the 18 90 Partnership Act as amended by the 1907 act. And that's an important but not generally well known little snippet. Because it's the 18 90 act that specifically states that quotes in Scotland, a firm is a legal person distinct from the partners off whom it is composed. Quotes. Yeah, and even more oddly, there's no further guidance as to what that means nor why it was inserted in the first place. Well, he said
spk_0: 1:38
that just weird on DH hang well, that might be a 129 year old legal distinction. It had pretty far reaching consequences
spk_1: 1:48
exactly. We know from feedback that lots of our listeners all over the world have had two onboard SL piece, and it isn't always obvious how or why they're different from by the limited liability partnerships or the more vanilla limited partnership.
spk_0: 2:06
So write what would be the main features you think we need to talk about?
spk_1: 2:10
Well, I think as we mentioned, there's the fact that they have distinct legal personality separate from the partners. But there are other aspect sous well, so they have limited filing requirements. The information required about the pardon that she's also quite limited. They can't be permanently wound up, and the person was significant control rules. The Piercy roles were extended to Scottish partnerships later than other UK entities, and they're still not being well enforced.
spk_0: 2:42
No on, that's quite a list.
spk_1: 2:45
And already it tells you a lot about why they became so popular with money. Laundress?
spk_0: 2:49
Yes. And justice. One recently discovered small fact into that mix that we will come back to you later. SL piece also act as Thie Person was interviewed control PSC for more than 1500 other UK entities on just one of those sl ps accounts for 152 all on its own.
spk_1: 3:11
And yet somehow I'm not that surprised
spk_0: 3:13
for Ray. You know, after 17 with those of the dark money files knives with my
spk_1: 3:18
So why'd you want to start?
spk_0: 3:20
All right. Do you want to give us a bit of the historic background as to why they were devised in the first place?
spk_1: 3:25
Oh, yes. Now limited partnerships were introduced to allow for people to invest in a partnership while limiting their exposure to the partnerships liability.
spk_0: 3:37
Right. So I'm like, ask you and me When we started out in business all those years ago with a general partnership, we were both jointly or individually liable for end your rule of the partnerships depths if it goes past. And that's not true. The limited partners,
spk_1: 3:51
No it's not. A general partnership must be composed of two or more general partners, as you point out, but a limited partnership only needs one of those general partners. Although I can have Mawr in all respects, they're the same as a general partner in an ordinary partnership. But a limited partnership also has at least one limited partner who contributes capital but must not be involved in the day to day running of the partnership.
spk_0: 4:23
Okay, and because the UK is not the only place in the world where you can find them,
spk_1: 4:27
Oh, no. They found, for example, in the US, New Zealand and in Denmark, where they're called KS companies on DH. Those companies featured into the report into the Danske Bank affair. You might remember
spk_0: 4:41
I do so all of those air composed or at a minimum, a general partner on a limited partner On each of those come themselves, I believe, be a legal entity.
spk_1: 4:52
Yes, that's right. English, Welsh and Northern Irish Limited partnerships are composed in the same way as Scottish, but the big difference is that they don't have this separate legal existence, which means they can't enter into contracts in their own right. They can't sue or be sued. And I can't open bank accounts. All of those things are done in the name of thie underlying partners, which means they're exempt from the PSC regime, as it doesn't really have any meaning for an entity which doesn't have separate legal status.
spk_0: 5:23
Exactly. And I think it's also worth mentioning their tax status at this point, isn't it?
spk_1: 5:29
Ah, yes. And here they're a ll the same. Which is that their tax transparent. And by that I mean limited partnership is not itself assessed for any tax dazzle. The profits passed through the partnership and attacks in the hands of the individual partners.
spk_0: 5:45
And that's why they don't have to find accounts with companies House.
spk_1: 5:49
That's right. But then limited liability partnerships. LPs are also tax transparent, but they do have to file accounts with companies house every year,
spk_0: 5:59
Which is not, isn't it? I don't really know why that should be, except the only obvious distinction between limited partnerships. Andi liability partnership is that the LPs extend limited liability to the entire partnership, whereas LPs, of course, maintain open ended liability for the general partner. But I've no idea if that's the reason the discrepancy or whether it's just a idiosyncrasy of the system.
spk_1: 6:23
Mmm, well, grand. Maybe if one of our listeners doesn't know the reason why they might like to drop us a line, either by leaving us a message on our website at the dark money files dot com or by emailing I said the dark money files at gmail dot com.
spk_0: 6:38
Excellent. So right. We have established that Scottish Liberty partnerships, like all others, must be composed of a minimum of one general and one limited partner. But unlike other British limited partnerships, it has distinctly good personality and can do business in its own name.
spk_1: 6:56
Yes, they've been around for more than 100 years and were originally used in farming. Tendencies and latterly have been used to good effect in investment fund management.
spk_0: 7:07
Yes, however, they were discovered, If that's the right word around 10 or so years ago by those with rather different aims and objectives and put to use in a huge variety off laundromat scheme,
spk_1: 7:19
you've been looking at spreadsheets again. Gran,
spk_0: 7:22
I have Ray Comes has to be fair releases and your statistical reports on in corporations, and to solve companies and such like across all UK jurisdictions and covering the last six years.
spk_1: 7:34
And what does it tell us?
spk_0: 7:35
It tells us that Scottish Limited partnership registrations have gone from 11,099 in 2012 13 to 32,485 in 2017 18 and that's an increase of nearly 300%. Although the rate of increase has slowed in the last year or so
spk_1: 7:56
and for the other UK limited partnerships
spk_0: 7:58
well back in 2013 England and Wales had registered Mohr limited partnerships than Scotland had, but by 2018 there, only about half as many, although there was a sign that registrations were picking up as newly formed England and Wales Limited partnership for the year ending 2018 nearly tripled compared to the previous year at 1450.
spk_1: 8:22
And in Northern Ireland.
spk_0: 8:24
All right, there's only a tiny number, but it's still interesting because in 2013 there were only 62 which by last year had gone up to 646 well on half of that entire increase occurred in the last year between 2017 and 18 when registrations compared to the previous year were up by 500%.
spk_1: 8:45
Well, that's definitely one to watch.
spk_0: 8:47
It is on when we may come back to So shall we move on to the laundromats?
spk_1: 8:54
Yes. I guess the first real sightings were in the Russian on Azerbaijani laundromats. Yes, two in particular. High luck services and Polacks management were very prominent in the Azerbaijani laundromat, with millions if not billions flowing through their accounts in the Baltics.
spk_0: 9:13
Which is probably a good moment to explain why SL PS became so popular.
spk_1: 9:19
It is. And it gives us the opportunity to make the point again that the appearance of UK entities in laundromats does not mean that the money was laundered through the U. K
spk_0: 9:30
No, in fact, just the opposite. The last place they would open an account using a UK entity is actually the UK. The point here is that you can create a SLP online from anywhere in the world, pretty much generate your incorporation paperwork and walk into a bank and open the corporate bank account,
spk_1: 9:48
which, of course, you can do in the name of Scottish Limited Partnership because it has a separate legal existence
spk_0: 9:54
exactly on when it comes to the owners.
spk_1: 9:58
Well, this is where the red flags start to appear. Graham. All these laundromat sl ps exhibited similar structures. Both general and limited partners would be legal entities based in offshore locations such as Billy's, Marshall Islands, Dominica or the Seychelles if they named to PSC. And often they don't bother because, frankly, companies House doesn't enforce the requirement. It tends to be someone from one of the central or Eastern European states, like Ukraine, Belarus, RS, Pakistan. They don't have to file accounts or even provide the addresses or names of the signatures to the partnership applications. Frankly, despite all the transparency, you still know nothing about them.
spk_0: 10:47
Except, of course, that they are UK companies and therefore carry at least of the near of respectability.
spk_1: 10:54
Yes, so when millions of dollars started flowing through the accounts with Danske Bank or a B. L. V, or trust her and others, there was no way of checking or verifying most of the entity information to see if it's reliable.
spk_0: 11:09
No, no. And then they started cropping up all over the place.
spk_1: 11:14
Yes, David Leese, get the Herald in Scotland along with Richard Smith, have been at the forefront of UK media trying to alert the world to this problem along with the O. C C R P. Who we regularly mentioned, who brought the laundromats to global attention in the first place.
spk_0: 11:30
Yep. And now it's almost impossible to quantify how many SL PS have been used in money laundering operations other than to say they to crop up all over Eastern Europe and have appeared, amongst other things, on U N Band Entity list as well as on paperwork leak from Ukraine following the Mei Dan Revolution and the deposing off Yanukovich.
spk_1: 11:52
So we'd say that anyone outside of the UK who was on boarded Scottish Limited partnerships, which hit one or more of the red flags that we talked about, should be very watchful and take great care over the Jew diligence as there is a high incidence of suspicion in relation to such entities,
spk_0: 12:10
Yes, but I think we ought to come back to the point I made at the beginning, which is the emergence of new structures using SL PS to continue to mask beneficial ownership.
spk_1: 12:21
Yeah, which is the rise of the Scottish Limited Partnership is PFC
spk_0: 12:27
Yes, now as I said earlier there now, PSC to a total of more than 1500 other UK entities, many of which are also Scottish limited partnerships,
spk_1: 12:38
which is not surprisingly, rather confusing.
spk_0: 12:42
It is. So let's work our way through one example and just to reiterate our little caveat, there is no suggestion of wrongdoing by this company.
spk_1: 12:51
Perish the thought crime.
spk_0: 12:53
Thank you. Write it. Merely exhibit structure. Which helps to explain why others might also do so for more nefarious means.
spk_1: 13:00
Well, indeed. On Daz Previously, we've posted a structure chant to our website at the dark money files. Don't come on the page First Season two Episode five
spk_0: 13:10
Okay, so this Scottish Limited partnership is called Delta Investment LP. It was incorporated in 2014 with Corporate Management Limited as General Donna on DH Capital Consorting Limited as limited partner.
spk_1: 13:28
Well, okay. Both of whom are located in one of our favourite offshore locations, the Seychelles,
spk_0: 13:35
you know, right. We should do a special from there one day.
spk_1: 13:38
All that will be nice. Any chance we could get someone to sponsor us? Do you think?
spk_0: 13:42
Possibly? Although I don't think the Seychelles Tourist Board will be high on that list.
spk_1: 13:47
Well, no. Anyway, those two retired in 2017 to be replaced by bond West on DH interval both of the Marshall Islands.
spk_0: 14:00
So I know they're barely moving companies.
spk_1: 14:03
Oh, yes, they are. At the same time, they appointed a further general partner called Walbridge Logistics LP, which is also a Scottish limited partnership.
spk_0: 14:15
Which means that it's now controlled by another Scottish nobody partnership. So we should
spk_1: 14:20
live in the
spk_0: 14:20
ownership structure for that one?
spk_1: 14:23
Well, yes. Which tells us that the two original partners were Dex, Berg and Mont Bridge, also of the Marshall Islands.
spk_0: 14:34
We could do a special from there too. Yeah, they are also on the move cos
spk_1: 14:39
they certainly are. They were appointed in March 2017 but replaced in December of 2017. Shortly after the PSC rules were extended to SL piece by five new partners.
spk_0: 14:53
Five who say,
spk_1: 14:55
Oh, yes, five
spk_0: 14:58
with a heavy heart. Ray, I'm going to ask you who they were.
spk_1: 15:03
Well, unbelievably Graham, they were four limited partnerships Andan entity whose status is unknown.
spk_0: 15:10
Oh, colour me Surprised Ray
spk_1: 15:13
and even Mohr Unbelievably, they were dotted all over the world.
spk_0: 15:18
You know, right? This sounds awfully like a conversation we had two weeks ago about limited liability partnerships.
spk_1: 15:25
It's very similar, Graham. I guess on the principle that if it works, keep doing it. Two of these five Canadian limited partnerships one South African into a UK one Northern Irish and one English.
spk_0: 15:42
Okay, so if the new co ones at least we can further identify the partners. But of course, as liberty partnerships, they won't have Pierre sees.
spk_1: 15:51
No. But if you're interested, Will Traum Nordic, which is the English LP, has logo form on Hill, him on both of Nevis as its partners.
spk_0: 16:04
Both Alan Mulally Cos
spk_1: 16:06
Well, they certainly fit the template. Don't know. Yes. And Lord House Development LP, which is the Northern Irish Limited partnership as our old friends tool, Berg and you knew well as partners.
spk_0: 16:21
Come on, Cool house. At this point, I believe I have a full house because they are also Alan Mulally cos
spk_1: 16:30
indeed, this is a house owned by Ali. Move. Yeah, so So once. Well, quite so once more, starting from a Scottish limited partnership, we have a complex structure with entities based all over the world. Most of which, where we can identify them, resolved to a company for which Ali Mouli has signed accounts on. Which means, at the very least, it's being operated by the same people. But not a single human being has been revealed on the paperwork.
spk_0: 17:02
No, which only serves to emphasise yet again how careful financial institutions have to obey when on boarding these entities, particularly if those when its institutions are not based here in the UK.
spk_1: 17:14
Yes, and let's not forget that with Scottish limited partnerships. There's a special twist to this because a partnership that you think no longer exists, Khun suddenly come back to life, County Graham.
spk_0: 17:28
It can and I and regularly does really,
spk_1: 17:32
absolutely eso. That's one to watch out for. But I think in passing, given how ubiquitous and important these wider structures are in laundromats, this episode may well have provoked more questions that we can answer in this former. So we'd be delighted to receive any follow up requests, either direct fire the dark Money files at gmail dot com. We'll fire the website the dark money files dot com or through messaging. Either of us on Twitter. Arlington, definitely. Okay, so what have we got in store for next week, right?
spk_0: 18:06
Well, right. I'm off to Lithuania on Tuesday as a guest of Transparency International.
spk_1: 18:12
All that's nice.
spk_0: 18:13
Yes. I'm going to be sitting on an expert panel convened by T I to look at what went wrong in Lithuania that allowed some of its banks to play a central role in many of the laundromats we've talked about, but also and much more importantly, what they could do to avoid it happening again.
spk_1: 18:32
Oh, well, on DH, who else is gonna be there?
spk_0: 18:35
Well, as I understand it, the Bank of Lithuania, members of the banking community from Lithuania alongside the Lithuanian Banking Association, members of social organisations who were affected and also members off the press. And I think it's also actually open to members of the public
spk_1: 18:53
could be a fascinating couple of days.
spk_0: 18:55
Indeed it could. So I think if all goes according to plan at these part of next week's episode could be an explanation of having went and would emerge from the conversations. But also, maybe you and I could have a broader discussion about how some of those consequences might affect the wider financial institutions across Europe and beyond.
spk_1: 19:13
Well, I'm looking forward to it.
spk_0: 19:16
Thank you for listening to this episode of Start with the violent Way Like this in future episodes fully subscribe through iTunes, Spotify or your normal cars provided thanks.
