It is not just money that makes you lie; it also makes you cheat, because you can find a way to become wealthy easily by being a ghost in the darkness and opening shell companies.
Shell companies perform well in the shadows, presenting opportunities for activities such as;
- tax evasion,
- money laundering, and
- asset concealment.
Shell companies are designed as legal business entities specifically to separate and mask the identities of their real owners and their assets.
Let's create Company A that has a chain of businesses with different products.
-The business earns legal funds by selling products and investing in assets like cars and luxury items.
-These activities generate legal income and contribute to the business's overall operations.
However, businesses also have shell companies on side with no real employees or operations.
Company A can complete its transactions using false documents to hide illegal activities such as 𝐭𝐚𝐱 𝐞𝐯𝐚𝐬𝐢𝐨𝐧 𝐨𝐫 𝐡𝐢𝐝𝐢𝐧𝐠 𝐚𝐬𝐬𝐞𝐭𝐬.
Another type of shell company is the "𝐬𝐡𝐞𝐥𝐟" company, known for its lack of activity. They are described as 'pre-registered companies' that have no activity and are created to be 'put on the shelf' to 'age' and be sold later.
Similar to a fine red wine which is stored for a long term to get 'aged' on the shelf and increase in value over time, becoming more desirable for purchase
The long life span and established presence in the market often lead many buyers to use shell companies to secure 𝐥𝐨𝐚𝐧𝐬, 𝐥𝐞𝐚𝐬𝐞𝐬, 𝐚𝐧𝐝 𝐥𝐨𝐚𝐧𝐬 𝐟𝐫𝐨𝐦 𝐛𝐚𝐧𝐤𝐬, given that financial institutions prefer to do business with established entities.
Shell companies are 𝐥𝐞𝐠𝐚𝐥 𝐚𝐧𝐝 𝐥𝐞𝐠𝐢𝐭𝐢𝐦𝐚𝐭𝐞 𝐞𝐧𝐭𝐢𝐭𝐢𝐞𝐬 that can be used for both legal and illegal purposes.
A well-known brand may employ ghost companies to maintain anonymity while purchasing land or property, thereby avoiding potential price negotiation tactics.
There are a number of techniques used in money laundering through shell companies, all with the goal of making it harder for investigators to determine where the money came from, which are:
- Trade-based money laundering
- Round-tripping
- Back-loan
- Real-estate transactions
- Mirror Trading Scheme
- Kickback schemes
- Corporate mergers or special-purpose acquisition companies
Always remember that shell companies often conduct multiple transactions within a brief time frame, which hides the volume and frequency of transactions. And because of this, it might be challenging for authorities to identify the real source of funding.