Shell companies. Another tool for money laundering that doesn’t appear to be going away is the use of shell companies. Shell companies do not necessarily have any actual business operations; they are often set up specifically for carrying out complex financial transactions designed to get around laws.
Kenneth Rijock is a former money launderer turned money-laundering expert who now consults with financial institutions. Rijock used to use shell companies in his money-laundering operations. He says he would form the companies and use them for only six months, then dissolve them before he would have been required to disclose more information about the companies.
He says regulators and officials have their “heads in the sand” and are not doing all they should do to clean up shell companies. “Plus we have all these sharp lawyers in the United States who are involved in minimizing taxes for wealthy individuals. So the wealthy individual forms a shell company, and he invests in hedge funds, which are all located in the Caymans, and there are a lot of transparency problems,” says Rijock. This proliferation of shell companies for tax dodges and even legitimate business purposes makes it even easier to have a shell company that’s for money laundering without it being obvious.
Rijock doesn’t think the use of shell companies for illegal purposes will stop in the United States until ownership disclosure is required. Senator Carl Levin (D-MI) and Senator Chuck Grassley (R-IA) have proposed legislation that would require states to collect such information, but the bill had not passed at press time. When the companies exist outside of the United States, it is even more difficult to do anything about it.