What is a shell company?
A shell company is an entity that exists only on paper, with no significant assets, operations, or employees. While shell companies can have legitimate uses (holding assets, facilitating mergers), they are frequently exploited in money laundering schemes to obscure the ownership and movement of funds through complex layering structures.
Shell companies and AML risk
Trust and company service providers and legal professionals involved in entity formation must be particularly vigilant. The UK National Risk Assessment identifies complex corporate structures as a high-risk channel for money laundering. Identifying shell companies requires thorough KYB checks and beneficial ownership verification.
Related terms
- Beneficial Owner - shell companies obscure beneficial ownership
- KYB - the process to identify shell company risks
- TCSP - providers most exposed to shell company risk