One of the more prescient authors I know is Ryan C. Hubbs, who in 2014, wrote an article for Fraud Magazine entitled “Shell Games”. Shell companies can come in different shapes and sizes. Shelf companies are those formed but not used for a long period of time. This provides the facade of appearing. Finally this type of fraud needs directors and nominees to fill out the package and provide the aura of legitimacy. The final area of concern is ‘hot spot’ or one location which is the home for multiple shell companies.

In your basic research do not limit your search to the International Consortium of Investigative Journalist’s database of companies listed in the Panama Papers themselves. Initially this database is reported to only have listed 5-7% of the world’s shell companies. Some of the basic questions you should be looking at from your own data and information such as information mis-matches around address, phone, fax, ship to, bank, cell contact.  Also consider whether incoming/outgoing wire transfer documents to determine if payments are forwared to or received from an unrelated third party.

Some specific reviews and steps you can take in public source information includes the following:

  1. Review web history. In this day and age, if a company or person does not have an active, up and running website, it should immediately raise a red flag.
  2. Review public records searches to identify owners and tracking to known associates. There is a variety of information, which a competent due diligence provider can search. Public records are an important source of information to link entities and individuals.
  3. Mapping the network. This is a key step as you must be able to document the linkage between all the information uncovered. You should map every scrap of information you uncover.
  4. Whois lookup’ for domain ownership, IP addresses. Using “Whois lookup” search engines, you can discover” such information as: domain ownership, IP addresses, the physical addresses of websites, the website administrators and their contact information and finally website creation dates.
  5. Evaluating online presences. Shell incorporators have difficulty fabricating an active and robust online presence because these companies technically do not exist. Some indicia of online authenticity include a properly designed website, which has other online content. There should be periodic and regular updates of information. Finally, there should be legitimate email addresses for contacting the company which are associated with a legitimate website address.

Three Key Takeaways 

  1. Do you have a mechanism to review your own vendors and agents for shell companies?
  2. Do not forget the open source tools available to you.
  3. Review your previously approved third parties in light of the Panama Papers.

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