A dirty little industry under threat from Brexit

THERE are many reasons why Scotland should make headlines in Tatarstan. Many people in this country of nearly four million on the Volga, forced into a union with Russia half a millennium ago, “get” our politics of Unionism and nationalism.

So perhaps it was not so surprising when a local news site followed up on June’s Brexit vote with an article headlined Scotland prepares to exit the United Kingdom. True, the site, KazanInform, assumed Nicola Sturgeon was a man and wrongly reported that our independence referendum was just six months before the EU vote. But those were just details.

The story had a simple message: “Scotland wants stability,” the site’s unnamed writer declared, “and clearly understands that very hard times could come with Britain’s exit from the European Union.” The interest is not in our constitutional niceties. Kazan- Inform is speaking to a specific audience: “investors” in the kind of Scottish shell companies routinely advertised across the former Soviet space as vehicles for corporate secrecy and tax avoidance.

People stashing their cash in tax havens through Scottish firms have an interest in our constitutional future. “Scottish offshore companies, which enjoyed considerable popularity among European and Russian investors, are being registered increasingly rarely,” the site says. “This is because of uncertainty over the country’s legal and tax regimes.” It says, many entrepreneurs have found a place for tax-free activity in the EU. Will this continue post-Brexit?

The site even suggests that independence within the EU could re-establish stability and end “the panic that has given rise to rumours and is putting off potential investors”. KazanInform – one of hundreds of similar local websites frankly, in my view, promoting murky agencies selling offshore firms – links to an advert for Scottish limited partnerships or SLPs.

These are the most popular Scottish shell companies and sell for around £1,500 on the open market. They are a significant and disproportionate part of a general market in British “brassplate” companies used, in conjunction with bank accounts in Latvia, to syphon billions of pounds from the former Soviet Union. As journalist colleagues in the former USSR emphasise, this is money that should be taxed to help provide basic services in places such as Tatarstan.

Last week, The Herald published calculations for the value of the SLP business. We think £25 million is made in fees a year from selling hosting shell companies; not a lot. But there are still people positioning for a share of this business in the wake of Brexit. There is open talk in Latvia about Riga replacing London, Bristol or Edinburgh as the new natural home for EU shell companies that, bluntly, are bleeding some poor countries dry.

Paradoxically, our politicians have only just realised that the UK is a giant conduit for multi-billion-dollar laundering. Two British firms were named in the United States this month for handling $10 billion. Kazan-Inform may be wrong about the decline in SLPs. But it would be funny if this dirty little industry in Scotland was ended by Brexit, not political action.

‘‘ People stashing their cash in tax havens through Scottish firms have an interest in our constitutional future