Using data analytics to find fraud under those shells

Fraudsters increasingly are using shell companies to commit everything from asset misappropriation and money laundering to bribery and corruption schemes. Audit committees want fraud examiners to make sure their organizations aren’t victims. Here’s how to use fraud data analytics to sniff out illegal shells.

Google the phrase “shell company fraud scheme” and you’ll discover more news stories than you have time to read. In Southeast Asia, an employee stole $11 million using a false-billing shell-company scheme. In the U.S., a company lost $65 million through a similar scheme. Fraudsters are using shell companies to steal millions of dollars from organizations every year.

Shell companies are business entities that typically have no physical presence (other than a mailing address), no employees and generate little, if any, independent value. They’re not necessarily illegal, but employees can use them to commit fraud.