UK ministers have been urged to sort the “smugglers’ cove in Scotland” created by new laws designed to tackle “dirty money”.
Shadow Scottish Secretary Ian Murray claimed those who “laundered [Vladimir] Putin’s dirty money” in Scotland before 2014 are “in the clear” due to the way the legislation has been drafted.
The Economic Crime (Transparency and Enforcement) Act 2022 establishes a new register of overseas entities, requiring foreign owners of property in the UK to declare their true identity.
The move is intended to ensure criminals cannot hide behind secretive webs of shell companies, and those who fail to comply will have restrictions placed on selling the property.
The legislation applies retrospectively to property bought by overseas owners up to 20 years ago in England and Wales, and since December 2014 in Scotland.
Murray highlighted a Labour bid to change this, warning in the Commons: “So, if you’ve laundered Putin’s dirty money in Scotland before 2014 you’re in the clear.
“For example, Perthshire’s Aberuchill Castle, bought by Russian steel magnate Vladimir Lisin for over £5m in 2005, who is on the Treasury’s watchlist since 2008, is not covered.
“Vladimir Romanov, who bought Heart of Midlothian Football Club in 2005 and swathes of central Edinburgh, and is allegedly hiding in Moscow under the protection of Putin, would not have been covered either.
“But they would in England - so, does the Secretary of State think that is right, and what is he doing to implement the LCM [legislative consent motion] amendment to sort this smugglers’ cove in Scotland?”
Romanov’s chaotic reign at Hearts ended in 2013, while earlier this month, it was reported that Lisin had called for a peaceful diplomatic resolution to the conflict in Ukraine and said “lost lives are always a huge tragedy that is impossible to justify”.
Scottish Secretary Alister Jack replied: “As regards the registration of property, it’s actually England and Wales changed the rules in 1999 – in Scotland they were changed for transparency of ownership in 2014.
“The problem we have with the Bill is, if we go back before 2014, there’s a risk that third parties who didn’t know they were engaging with an overseas entity that was non-compliant could be hurt and that hurt is something they were unwillingly engaged in, and therefore we have to protect those third parties.
“So that’s the reason we haven’t gone back before 2014, and the joint committee that reviewed the draft legislation did agree with that point, but I absolutely have every sympathy with the points he makes.”
Murray replied: “I’m sure that anomaly could be sorted in terms of making sure you don’t hurt unsuspecting third parties.”
Pressed to reform Companies House and Scottish Limited Partnerships, Jack said: “The UK Government did clamp down on the use of Scottish Limited Partnerships in 2018, but we do want to do more, and early in the next session of Parliament there will be an updated Economic Crime Bill and there will be further measures taken.
“Because [Murray] is absolutely right – those were being used by foreign individuals and foreign companies to launder money, we know that.
“The reforms in 2018 increased transparency and they put more stringent checks on the individuals who were forming those companies.
“But, yes, with hopefully support from the Labour Party, we will tackle this in the next session of Parliament.”
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