Seven Indicators of Shell Company Risk | Hacker News Reader

Seven Indicators of Shell Company Risk

moodys.com

14 pointsbelter5 comments

While the suspicious cases are now almost common knowledge, I'd be interested to read about cases of the opposite - shell companies being used to facilitate transactions and not doing anything remotely shady.

How much time do you have to wait?... :-))

"Letterbox fraud: Red flags found at almost 380,000 Dutch companies" - https://nltimes.nl/2024/01/30/letterbox-fraud-red-flags-foun...

Letterbox companies aren't shady just because they're letterbox companies. It's extremely common, for a variety of reason: like two founders, both married, with neither of them wanting to domiciliate the company at their place. Another reason might be incorporating the company in one city, where one language is spoken officially, while living in another region, where another language is the official administrative language.

You can find things like tennis table clubs using a letterbox company or bikers club.

Or simply people who have no office, especially in this day and age of Internet, and who are renting a place and know they'll move out. They prefer a stable address for their business.

The problem when "everything is a red flag" is that you end up in a world where everybody is flagged as suspicious. In Belgium there's been an incredible statistic that came out: something insane like one out of every four citizen had already been flagged at least once. This doesn't work.

For when everybody is suspicious, nobody is.

Also companies offering letterbox services are extremely controlled. They're the first line in the KYC/AML verification and they're liable if they let obvious scams in.

Companies offering letterbox services are often recommended by accountants to their clients.

I know these very well and used one personally in 2023 (because I opened a company in a country before moving to that country).

Many online business have a website, a payment processor and a "letterbox" address.

This is business 101.

Ironic timing on this post as the overseer is now collecting data as of January 1 2024. What do you believe the intent of that data collection to be?

For everyone reading this who owns a U.S. based business the great "shell game" is setting up for a disruption compliments of the U.S. Treasury. This shell game reveal will come in time as more DOJ filings against those who thought they could hide. Of course Waldo is not going to reveal himself in the crowd however when all the non-Waldos step aside who is left?

"Many companies are required to report information to FinCEN about the individuals who ultimately own or control them. FinCEN began accepting reports on January 1, 2024"

www.fincen.gov / boi

Findings:

- ~4% (20M of 500M companies) have shell-company indicators

- Indicators are limited to patently obvious: most-commonly bulk registrations and "atypical directorships" - because it's easy to register (in the UK), but hard to make up people (hence getting pseudo-directors)

- Most are in the US (unclear if percentage-shell is higher)

Reflections:

- 500M companies for 6B people is ~1 company per 12 humans. Very high!

- Post-Panama-Papers drop in prevalence is likely just improvement in shell quality to avoid obvious indicators

- Still, 4% or even 10% could be manageable, but effective management would drive a jurisdictional race to the bottom

- Unclear to me: are private data brokers ahead of the government in making actionable analysis available to investors?

Has anyone (in academia) come up with an ownership/governance model that's traceable but privacy-preserving for different applications (market monitoring and investment due-diligence; criminal, civil, or tax investigations)?

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