Shell companies are business entities that exist only on paper, with no physical presence, no employees, and no operations. They are often used for legitimate purposes, such as facilitating mergers and acquisitions, protecting assets, or managing investments. However, they are also frequently exploited for illegal activities, such as tax evasion and money laundering, due to their ability to obscure ownership and financial transactions12. Money launderers can use shell companies to disguise the origin of illicit funds, evade sanctions, and avoid the anti-money laundering (AML) measures that financial institutions use to detect suspicious activity23. The process typically involves setting up a shell company in a jurisdiction known for strict privacy laws, such as a tax haven, and then using it to move and hide illicit funds while hiding the identity of the ultimate beneficiaries13.
In this scenario, the fact that the company has been a client for many years does not rule out the possibility of money laundering. The company could have changed its ownership, activities, or risk profile over time, or it could have been involved in money laundering all along without being detected. The fact that the company has added several new subsidiaries that are recently created shell companies is a red flag that indicates potential money laundering. The company could be using the shell companies to hide the source and destination of its funds, or to conceal the identity of its beneficial owners. The institution should perform enhanced due diligence on the company and its subsidiaries, and report any suspicious transactions or activities to the relevant authorities.
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How Shell Companies Are Used in Money Laundering: A Detailed Guide
Shell Companies and Money Laundering
The Role of Shell Companies in Money Laundering

Banks mustcomply with legal subpoenaswhile ensuring AML compliance.
Option B (Correct):The bank shouldreview client transactionsandrespond fullyto law enforcement.
Option A (Incorrect):Filing a SAR simply because of a subpoenaisnot requiredunless suspicious activity is identified.
Option C (Incorrect):Tipping offthe client about the subpoena isillegalunder AML laws.
Option D (Incorrect):Risk scores should be reviewedbut not automatically adjustedsolely based on a subpoena.
Reference:U.S. Bank Secrecy Act (BSA) Subpoena Compliance Rules, FATF Recommendation 40 (International Cooperation).

A bank's risk assessment is a process of identifying, measuring, and mitigating the potential risks that the bank faces in its operations, products, services, and customers. According to the ACAMS Study Guide, a bank should focus on the following areas when performing a risk assessment1:
* The type and location of the institution's clients. This involves analyzing the customer base, the types of accounts and transactions, the source and destination of funds, the level of due diligence and verification, and the risk profile of the customers. For example, a bank should consider whether its customers are individuals or entities, domestic or foreign, politically exposed persons, high-net-worth individuals, non-profit organizations, or cash-intensive businesses. The location of the customers may also indicate the level of exposure to money laundering, terrorist financing, sanctions, or tax evasion risks.
* The nature and breadth of the services and products the institution provides. This involves evaluating the range and complexity of the products and services offered by the bank, the delivery channels, the payment methods, and the innovation and technology involved. For example, a bank should consider whether it offers wire transfers, correspondent banking, trade finance, private banking, trust and fiduciary services, prepaid cards, mobile banking, or cryptocurrency services. The nature and breadth of the services and products may also affect the level of transparency, traceability, and compliance of the transactions.
* The geographic locations where the institution does business. This involves assessing the jurisdictions where the bank operates, where its customers reside, where its counterparties are located, and where the funds flow. For example, a bank should consider whether it has branches, subsidiaries, or affiliates in high-risk countries, whether it serves customers from high-risk countries, whether it engages in cross- border transactions, and whether it complies with the local laws and regulations of the countries where it does business. The geographic locations where the institution does business may also influence the level of exposure to political, legal, regulatory, or reputational risks.
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1: ACAMS Study Guide, Chapter 2: Risk Assessments, 1

Suspicious transaction report (STR) information is confidential and should not be disclosed to anyone outside the compliance function or law enforcement authorities. Providing STR information to the credit department could compromise the integrity of the reporting process and expose the institution to legal risks. The compliance officer should decline to provide the STR information to the credit department and explain the reasons for doing so.
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CAMS Certification Package - 6th Edition | ACAMS, Chapter 4: Conducting and Supporting the Investigation Process, page 136 CAMS Certifications: How to Get CAMS Certified | ACAMS, Candidate Handbook, page 16 ACAMS CAMS Certification Video Training Course - Exam-Labs, Video 4.3: Suspicious Transaction Reporting Exam CAMS: Certified Anti-Money Laundering Specialist (the 6th edition), Practice Test 1,

The Certified Anti-Money Laundering Specialist (the 6th edition) Study Guide states that financial institutions should address all requests from law enforcement agencies completely and in a timely manner (Page 83).
Disregarding requests when there is a justifiable reason for doing so is not recommended, as this could impede the investigation. Sharing information about the investigation with analysts is not recommended, as this could compromise the investigation. Delaying responses by informing senior management of requests is also not recommended, as this could result in a delay in the investigation.