Shell Company
Overview
A shell company is a legal entity with no significant assets or operations, often used to obscure ownership or move funds. While shell companies can have legitimate purposes (holding assets, restructuring), they are frequently exploited for money laundering, tax evasion, and sanctions evasion.Regulators require financial institutions to identify and scrutinize shell companies during KYB and beneficial ownership checks. High-risk indicators include nominee directors, complex ownership chains, and registration in secrecy jurisdictions. Banks, fintechs, and corporate registries must apply enhanced due diligence when shell companies are involved, as they pose elevated AML/CFT risks.
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FAQ
What is a shell company?
A business entity with little to no operations or assets.
Why is it risky?
It can hide beneficial ownership and facilitate illicit activity.
How are they identified?
Through KYB checks, registries, and beneficial ownership verification.
Who monitors them?
Regulators and financial institutions under AML frameworks.