Scotland: Ukrainian anti-corruption prosecution targets Scottish limited partnership

Ukrainian prosecutors have alleged that a Lanarkshire-based firm was used to skim nearly $2 million from the Ukrainian government’s sale of cannon shells to the United Arab Emirates.

Fuerteventura Inter, a Scottish limited partnership (SLP) created in February 2015, is named in court documents filed by the National Anti-Corruption Bureau (Nabu), The Herald reports.

The firm was an intermediary in a deal between Ukrinmash, a Ukrainian state enterprise, and the UAE military.

Court documents allege that the firm was used to skim around $1.95 million from the deal - around 12 per cent of the total value.

Green MSP Andy Wightman told The Herald that the allegations highlighted issues with the legal regulation of Scottish limited partnerships.

Justice Secretary Michael Matheson said earlier this year that he is “very open” to a review of SLPs, which are being advertised as business vehicles for tax avoidance in Eastern Europe.

Unlike English partnerships, SLPs need not register for tax or provide financial reports if they conduct business abroad.

A typical scheme sees an SLP established with two “members” which are companies incorporated in Panama and the British Virgin Islands, where there is a zero per cent corporation tax.

The company can then open accounts elsewhere but does not need to register for UK tax or disclose financial accounts in Scotland.

Mr Wightman said: “These latest allegations of corruption and criminality conducted in the name of Scottish limited partnerships provide further damning evidence of the ease with which this legal arrangement can be used for nefarious purposes by unscrupulous criminal enterprises.

“The revelations contained in the Ukrainian court papers highlight the urgency with which the Scottish and UK Governments should be acting to clean up the obvious abuse that is taking place.

“Increased transparency, financial and accounting disclosure, criminal sanctions and reporting requirements are vital if this archaic legal entity is to have any future for legitimate business transactions.”