Demystifying The “Fraud Of Money Laundering” By Shell Companies

Medha Joshi, Dharmashastra National Law University, Jabalpur

ABSTRACT

Corporates are the foundational pillars of growth in an economy. Any deviance by the corporates encourages the notion of parallel economy. Creation of Shell Companies is one such operation through which the corporate houses in order to avoid taxes launder money to tax haven nations, where the tax norms are favourable to them. Controlling the operation of Shell Companies is sine qua non for the immobilization of laundering of unaccountable money. Parallel economy by way of Shell Companies manifests itself towards movement of unaccounted/ black money in an economy as against a legitimised system. Identification of Shell Companies is a difficult mechanism, where the beneficial owner is hidden in the mask of Corporate Veil. The paper elucidates for the fraud committed by the Shell Companies in due diligence of their business and acts as an intermediary to launder black money into legitimate money by means of fake and fictitious receipts and transactions.

Keywords: Shell Companies, Money Laundering, Tax haven nations, Parallel economy, Corporate Veil.