How do shell companies help with money laundering?
In: 70
Corporate tax structures are a key example here. Here’s a very simple example:
Amazon UK sells a ton of stuff for lots of money. But they aren’t ‘real’ Amazon, they only licence the brand so they can operate. They pay a ton of money (almost all their profits) in fees.
But they pay those fees to Amazon Cayman Islands. This is also not real. It is a processing company hired by real Amazon to deal with collecting fees. Amazon Cayman Islands bids for this contract at basement rates to beat the ‘competition’, so it barely covers its operating costs. It also had to borrow hundreds of millions from Amazon Republic of Ireland to get its startup costs, staff legal and IT/digital infrastructure set up. The interest payments on that debt are larger than Amazon Cayman Islands’s profit, so it only ever loses money and borrows more.
Amazon RoI makes money, but writes the debt owed by the barely solvent Amazon Cayman Islands against its taxes each year. After a while, they’ll fold Amazon CI, write off the debt one last time, then loan a couple hundred million to AmaZzon CaYyma IsLlands to start a new business!
In reality, there’s about 12 or 15 more shells and leases, transfers, etc involved in top tier corporate tax avoidance. Then they’ll also hire top level law firms to obscure it in paperwork that will take a forensics team 10 years to cut through.
This is how money laundering works too, because tax avoidance is money laundering! The people/companies who get caught typically do stupid things or set up Ponzie schemes that other rich people lose money to.
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