Which statement best describes a shell company?

Which statement best describes a shell company?

• A. An ordinary business with offices and staff
• B. A business existing only on paper with no office or employees
• C. A government agency
• D. A charity

Answer: (B)

A shell company is a business that exists only on paper, with no real operations, no physical office, and typically no employees. This lack of substance means there is little or no actual business activity behind the entity, making it easy to conceal ownership or route funds without transparent activity. In AML contexts, identifying such entities helps flag potential risks, because shells can be used to hide who truly owns or controls assets and to move money through layers to obscure sources. That’s why the description of existing only on paper with no office or employees is the best fit. In contrast, a normal business has real operations and a physical presence; a government agency or a charity has defined public or philanthropic roles and activities, which don’t fit the idea of a shell.

A shell company is a business that exists only on paper, with no real operations, no physical office, and typically no employees. This lack of substance means there is little or no actual business activity behind the entity, making it easy to conceal ownership or route funds without transparent activity. In AML contexts, identifying such entities helps flag potential risks, because shells can be used to hide who truly owns or controls assets and to move money through layers to obscure sources. That’s why the description of existing only on paper with no office or employees is the best fit. In contrast, a normal business has real operations and a physical presence; a government agency or a charity has defined public or philanthropic roles and activities, which don’t fit the idea of a shell.