The U.K. government has introduced a package of measures to increase transparency and tackle corruption in limited partnerships (LPs), which have long been identified as vehicles for money laundering. The measures, based on responses to a consultation paper issued by the Department for Business, Energy & Industrial Strategy (BEIS), are designed to increase transparency for both Scottish Limited Partnerships (SLPs) and LPs by ensuring these arrangements can still be used legitimately by pension funds and other investors while preventing abuse. The four main proposals are:
- those registering LPs must demonstrate they are registered with an official anti-money laundering (AML) supervised agent, such as an accountant or a lawyer, or an overseas equivalent
- the LP must demonstrate an ongoing link to the United Kingdom, for example by keeping its principal place of business in the United Kingdom
- all LPs must submit a confirmation statement at least every 12 months to Companies House, the U.K. registrar of companies, to ensure their information is accurate and up-to-date
- Companies House will be given powers to strike off dissolved LPs and LPs which are not carrying on business
It will now be mandatory for “presenters,” as they are termed, of new applications for an LP registration to show that they are registered with an AML supervisory body and to provide evidence of this on the application form. Applications from overseas will be subject to equivalent standards, though the government has yet to determine how to ensure compliance here. One option being considered would be to limit applications from overseas to countries within the European Economic Area (EEA). Overseas jurisdictions with equivalent standards to the EEA would be reviewed and potentially added to the list of acceptable countries. The regulations note that this will end direct registrations of LPs.
“The U.K. government continues to take the abuse of Scottish Limited Partnerships very seriously and will do everything necessary to crack down on crime lords exploiting them to launder dirty money.”
Lord Duncan, U.K. Government Minister
The requirement of ongoing links to the United Kingdom can be demonstrated in a variety of ways. This information will be requested upon application for registration and will be ongoing. On an application for registration, an LP must provide a proposed principal place of business in the United Kingdom. In addition, the principal place of business would have to remain in the jurisdiction of registration, for example a Scottish Limited Partnership’s principal place of business would have to be Scotland. The ways in which an LP can demonstrate its ongoing link are:
- retain the principal place of business in the United Kingdom
- demonstrate that they are continuing some legitimate business activity at an address in the United Kingdom
- demonstrate that they continue to engage the services of an agent that is registered with a U.K. AML supervisory body and which has agreed to provide its address as a service address for the LP
If either of the second two options are taken, the LP must notify the Registrar of any changes. Still under consideration is how the second two options will be demonstrated, as well as how these requirements—including the possibility of transitional arrangements—should apply to existing LPs.
While confirmation statements are already mandatory for SLPs, they will now be required from LPs in England, Wales, and Northern Ireland. The information currently required on applications to register an LP will be expanded (see box at right), and this additional information will also be required on the confirmation statement. Further, there will be a transitional period and mechanism to enable all existing LPs to submit the additional information.
Additional LP registration requrements
Currently, new registrations for LPs in England, Wales, and Northern Ireland require:
- The name of the firm
- The general nature of the business
- Address of the proposed principal place of business of the LP
- The term, if any, for which the LP is to be entered into
- The names and signatures of each general partner
- The names, amounts contributed, and signatures of each limited partner
- The name of the presenter and the presenter’s reference
In addition to this information, SLPs must also provide information about persons with significant control (PSC). The Government intends to add to this list the following information:
- contact information for all limited and general partners
- the date of birth and nationality of all limited and general partners that are natural persons
- an SIC (standard industrial classification) code, identifying the nature of the LP’s business.
This new legislation builds on laws introduced last year requiring SLPs to report their beneficial owner and make their ownership structure more transparent, and the new requirements resulted in an 80 percent reduction in the number of SLPs registered. In addition, draft laws were introduced this summer for the world’s first public register requiring overseas companies that own or buy property in the United Kingdom to provide details of their actual owners; the U.K.’s company register was made public in 2015 and was viewed 2 billion times last year; and a register of People of Significant Control was introduced in 2016—now totalling 4.6 million names. Finally, the government’s new Serious and Organised Crime Strategy was launched on 1 November.
Even before these latest reforms, the United Kingdom was recognised by non-governmental organization Transparency International as one of only four G20 countries with the highest rating for cracking down on anonymous companies.
Consultation on a broader package of reforms to Companies House will be subject to consultation by the Department for BEIS in the new year.