The government says SLPs and limited partnerships (LPs) are used by thousands of legitimate British businesses, particularly the private equity and pensions industry, to invest more than £30bn a year in the UK. SLPs and LPs are business entities created by two or more partners where at least one partner is liable for what they invest.

However, it says new evidence from a review carried out at the start of 2017, which is to be published shortly, shows SLPs have been exploited in complex money laundering schemes, including one which involved using over 100 SLPs to move up to $80bn out of Russia. They have also been linked to international criminal networks in Eastern Europe and around the world, and have allegedly been used in arms deals.

Business minister Andrew Griffiths said: ‘SLPs are being abused to carry out all manner of crimes abroad – from foreign money laundering to arms dealing.

‘This simply cannot continue to go unchecked and these reforms will improve their transparency and subject them to more stringent checks to ensure they can continue to be used as a legitimate way for investors and pension funds to invest in the UK.’

BEIS has released figures revealing just five frontmen were responsible for over half of 6,800 SLPs registered between January 2016 and mid-May 2017. By June 2017, 17,000 SLPs, over half of all SLPs, were registered at just 10 addresses.

The consultation to be launched this week seeks views on a number of reforms to ensure SLPs can continue to be used as a legitimate vehicle for investment.

They include requiring a real connection to the UK, including ensuring SLPs do business or maintain a service address in Scotland; registering new SLPs through a company formation agent, meaning frontmen will be subjected to anti-money laundering checks; and new powers for Companies House to remove limited partnerships from the company register if they are dissolved or are no longer operating.

BEIS says the reforms being proposed will apply to all limited partnerships in the UK and will also include new annual reporting requirements for limited partnerships in England and Wales and Northern Ireland, which will help Companies House ensure they comply with the law.

Last year, the government introduced laws requiring SLPs to report their beneficial owner and make their ownership structure more transparent, which saw a 80% reduction in the number registered.

The BEIS consultation on proposed reforms will close on 23 July.

Limited partnerships: reform of limited partnership law is here.

Report by Pat Sweet