David Leask: Beirut explosion raises questions about the shame of Scotland’s shell company

Lebanon, which also has other problems, is far from recovering. Its instability is now a threat to international security.

Even in the midst of a global pandemic, it was an event that radiated shockwaves, real and metaphorical.

The tremors in Beirut, at least politically, are reaching our shores. They raise serious questions about corporate secrecy in the UK – and in Scotland in particular.

Let me explain how.

This month, an international team of investigative journalists identified who they believe owned the abandoned chemicals that ignited in a dockside warehouse, causing all this death and destruction.

The Organized Crime and Corruption Reporting Project or OCCRP named a Ukrainian businessman called Volodymyr Verbonol as being responsible for the cargo, which had been unloaded from a dangerous vessel to navigate. Mr. Verbonol denied any connection.

To achieve it, OCCRP investigators had to remove the layers of opacity of businesses created in Cyprus – and the UK. They found the entrepreneur behind a complex web of companies, comprising a limited company in London called Savaro Ltd and two Scottish limited partnerships or SLPs called Savaro LP and Savaro Europe LP registered in an industrial state of Newton Stewart. Both were dissolved earlier this year.

Their official ownership – as with so many SLPs – was completely opaque. Savaro Ltd is being sued for the explosion in London. We will have to wait for the outcome of this litigation: the story of the Beirut explosion is a tangled mess that can take years to unravel.

However, the OCCRP investigation once again reminds us of the continued global ubiquity of SLPs, particularly in Ukraine, where they remain a preferred means of securing a respectable-looking “offshore company” and bank account for them. accompany him.

Transparency International calls these front companies “British vehicles of secrecy”.

After a string of scandals – including multibillion-dollar Russian and Azerbaijani laundromats where SLPs were at the heart of a global mechanism to clean up dirty money – the Westminster Conservatives pledged to reform Scotland’s law on partnerships, which is reserved.

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So far, they’ve only introduced a few simple changes that require SLPs to reveal their beneficial owners, in theory, if not in practice.

This, along with moves in the Baltic states to refuse to give SLPs bank accounts, may have reduced the popularity of the structures. But speech therapists still abound. And many of their real owners are bypassing well-meaning but gentle attempts by the Conservatives to force transparency. Easily, in fact.

Take the one behind some of the biggest investments in Uzbekistan. They’re secret – thanks to speech therapists. The Herald has already uncovered mysterious Scottish companies in the Central Asian country. The World Bank and the UN have blacklisted some of them after aid buying scandals. Yet such features north of the border continue to surface in various probes.

This month, human rights investigators released a report on who controls a major conglomerate called Orient Group linked to Uzbekistan’s first family. This network of companies has flourished in recent years, capturing for example the lion’s share of the investments of a sovereign wealth fund. Its founders are the brother of the son-in-law of the president of Uzbekistan, Shavkat Mirzoyoyev, according to UzInvestigations, a joint venture of criminologists from the University of Ulster and the Uzbek Human Rights Forum in Berlin.

UzInvestigations, however, was unable to uncover the owners of $ 138 million of shares in the Orient group companies. Why? They were held by eight SLPs whose ownership was completely opaque. Orient Group did not respond to questions on this matter. UzInvestigations stressed that opacity is not proof of wrongdoing in this or any other case, but called for a formal investigation into the SLPs in the UK and the Orient Group in Uzbekistan.

“Opaque legal forms like SLPs are a barrier to financial crime and corruption,” said Kris Lasslett of UzInvestigations, professor of criminology at the University of Ulster, generally speaking. “Recent reforms in the UK have improved business transparency, but until business service providers, banks, lawyers, accountants and auditors feel the end of AML laws, they will continue to serve gold-collar clients who launder their dirty assets with little risk or consequences. ”

The Tories are planning further reforms – and saying they want to strengthen the investigative powers and resources of Companies House, the UK companies register. Some anti-corruption activists are skeptical of the reach of the conservative proposals. They are certainly not happy with the pace of their introduction.

After all, SLPs are perhaps the most notorious UK shell companies. But they are

not the only type of UK partnership or business open to abuse.

Abroad, there is tangible irritation with UK authorities over this. “It is deeply frustrating that the elite of authoritarian countries like Uzbekistan can extend their privileges to exploit the British system of partnerships to hide their wealth,” said Umida Niyazova, director of the Uzbek Forum for Human Rights.

SNP politicians have been at the forefront of SLP crackdown calls. However, some more thorny pro-independence voices online suggest that criminal or unethical speech-language pathologists are not really ‘Scottish’. Alas, there are a lot of them. They are made and hosted in Scotland and Scottish interests are pushing against more radical reform. Why? Because SLPs are also legally tax-efficient vehicles for equity funds. English Tories – to be frank – are not forcing the Scots to allow criminals and kleptocrats.

There are difficult cultural questions here that many of us have avoided for years. Me? I think the abuse of SLP and the larger shell companies is a ‘seismic’ problem that undermines Scottish and UK companies, even though many of us choose to ignore the geologic scale damage they cause. in the distance and the aftershocks rumbling under our own feet.

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