Moody's - Shell Company Indicator Data Story by Moody's Corporation

In the era of Exponential Risk, interlocking global challenges are combining to create complex problems. Understanding the real-time complexities of risk through smart use of data and technology is imperative for financial institutions, businesses, and governments, to stay on the right side of regulatory, financial, and reputational challenges.

Moody’s Shell Company Indicator, a subscription-based application launched in November 2023 that analyzes data of more than 472 million companies and millions of individuals, raises flags to identify shell companies — a prime example of where complex risk can reside — that are potentially being misused for illegal purposes.

Shell companies, corporations without significant business assets or operations, are not necessarily illegal — there are many legitimate reasons to create them. However, these legal instruments can be abused by bad actors to launder money gained through illicit activities, such as trafficking and environmental crime. They can create a mask for sanctioned individuals to disguise their business ownership, and they can hide financial crimes, such as tax evasion, fraud, and bribery.

The 2016 “Panama Papers” exposed such crimes by some shell companies after 11.5 million confidential documents about a global network of 214,000 offshore companies were leaked. The knock-on effects reportedly erased about $135 billion in market valuation of nearly 400 publicly traded companies, according to The Associated Press.

Moody’s compliance and third-party risk management business navigates many of these risk exposures for customers, and the challenge is only rising. The total number of sanctions alerts sent to Moody’s clients rose from about 3 million in 2017 to more than 58 million in 2023, while money laundering risk alerts rose to more than 56 million in 2023, across more than 220 countries and territories worldwide.