The latest news coming from Russia and China spotlight the overall pervasive and often unaddressed risks posed by shell companies:
"One is the "Russian Laundromat" case, the term given by the media to a scheme that flourished from 2010 to 2014. According to the Organized Crime and Corruption Reporting Project, known as OCCRP, a consortium of international investigative journalists that specializes in reporting on organized crime and corruption and that received the transactional records, $20.8 billion in suspicious funds were transferred out of 19 Russian banks from 2010 to 2014.
More recently, in June and August of this year, the United States Attorney's Office for the District of Columbia filed three separate civil forfeiture actions in Washington to recover millions of dollars that were alleged to have been laundered through shell companies and used to finance North Korea's development of weapons of mass destruction and its ballistic missile program in violation of international and US sanctions.
The scheme, as one of the complaints alleged, included a pattern of transactions employing shell companies formed in Hong Kong, Anguilla, and the British Virgin Islands by a Chinese national that enabled North Korea to finance its sanctioned operations behind a curtain of seemingly innocuous payments for ordinary commodities."
Shell companies are often a party (willingly or unknowingly) to the facilitation of corruption, money laundering, tax evasion, bribery and corruption, human trafficking, and drug smuggling. With such an extensive list of predicate offenses, one would assume that stricter regulations to govern loopholes within the AML/CFT regulations would be rigorously enforced and scrutinized. However, despite the prolific use of shell companies and their connectivity to both legitimate financial systems and criminal activities, there have been minimal efforts to mitigate their inherent risks in scale. The recent Ultimate Beneficial Ownership (UBO) rule enacted by FinCEN may help curb that risk, but only if implemented more effectively than other AML rules by financial institutions.