Shell companies are legal and have legitimate uses, but they are a standard tool for hiding beneficial owners and layering funds. Red flags are nominee directors, a registered-agent address shared by hundreds of companies, no website or staff, and payments with no business purpose. Beneficial ownership registers and customer due diligence are the main controls.
Example
A company with a mailbox address, one nominee director and no employees receives large wires from unrelated businesses and sends them on within days.
Where it appears in the exams
This topic is relevant for CAMS, CFCS, CGSS.
Related terms
- Beneficial owner: The beneficial owner is the real person who ultimately owns or controls a customer, or on whose behalf a transaction is carried out, even if ownership is held through companies, trusts or nominees.
- Layering: Layering is the second stage of money laundering: moving funds through many transactions, accounts, companies or countries to hide where they came from.
- Customer due diligence (CDD): Customer due diligence is the set of checks a firm does on a customer: identify and verify them, identify the beneficial owner, understand the purpose of the relationship, and monitor it over time.
Source: FATF Recommendations 24 and 25; FATF guidance on beneficial ownership. Independent explanation for study purposes, not legal advice.