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What is shell company money laundering
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If you’re reading this, you’re probably facing shell company money laundering charges, or the government is investigating your business transactions. This article explains what shell company money laundering actually is, the prison time you’re looking at, and what changed in 2025 with enforcement.
Shell Companies Aren’t Illegal – Using Them to Hide Money Is
A shell company is just a business entity with no real operations, no employees, maybe no office. Lots of legitimate reasons exist for creating shell companies – asset protection, privacy, holding intellectual property. The problem starts when you use them to disguise where money comes from.
Money laundering through shell companies works like this: You’ve got proceeds from health care fraud, drug trafficking, wire fraud, whatever the underlying crime is. You can’t just deposit $500,000 into your personal bank account – that triggers reporting requirements, raises questions you don’t want to answer. So you create a shell company, maybe call it “ABC Wholesale Distributors” or “XYZ Consulting Services,” open a business bank account, and run the dirty money through it. On paper it looks like legitimate business income.
The Southern District of New York just sentenced Mukhiddin Kadirov to 30 months in prison for exactly this. He controlled three shell companies that were supposedly wholesale businesses – they weren’t. From March 2021 through spring 2022, he laundered approximately $4.2 million from a Manhattan pharmacy that was defrauding Medicare and Medicaid. He even used someone else’s identity to control the accounts, someone who wasn’t in the United States anymore.
That case shows how prosecutors think about these schemes. Kadirov provided false information to banks, created fake business profiles, layered transactions through multiple accounts. The government doesn’t care that shell companies can be legal – they care that you lied to financial institutions and concealed criminal proceeds.
Federal Penalties Are Brutal
Money laundering under 18 USC Section 1956 carries up to 20 years in federal prison. The fine is the greater of $500,000 or twice the value of the property involved in the transaction. Think about that – if you laundered $2 million, you’re looking at a potential $4 million fine.
Violations of 18 USC 1957 – engaging in monetary transactions in property derived from specified unlawful activity – carry up to 10 years and fines up to $250,000 or twice the transaction value. You also face supervised release after prison, typically up to three years.
The Federal Sentencing Guidelines make this worse. The guidelines say your sentencing range for money laundering should match the underlying criminal conduct. So if you’re laundering proceeds from a $10 million health care fraud scheme, you’re getting sentenced as if you committed the fraud yourself – even if someone else ran that part of the operation.
Kadirov got 30 months for laundering $4.2 million. That’s on the lower end because he cooperated, pleaded guilty early, showed acceptance of responsibility. Fight the case and lose at trial? You’re looking at significantly more time. The 20-year maximum isn’t theoretical – federal judges use it in major cases involving organized crime, drug cartels, large-scale fraud operations.
Civil penalties exist too. FinCEN can impose civil fines of the greater of $10,000 or the value of funds involved in the transaction for violations of subsections 1956(a)(1), (a)(2), or (a)(3). That’s on top of criminal penalties, not instead of them.
2025 Changed the Corporate Transparency Act – Not Enforcement
The Corporate Transparency Act was enacted in 2021 to combat anonymous shell companies. It required businesses to report beneficial ownership information to FinCEN – basically, who actually owns and controls the company. The idea was that if the government knows who’s behind every shell company, money laundering becomes harder.
In March 2025, Treasury suspended enforcement of the CTA for U.S. companies and U.S. citizens. On March 26, 2025, FinCEN issued an interim final rule removing the requirement for domestic reporting companies to file beneficial ownership reports. Now only foreign companies registering to do business in the United States must comply – they had until April 25, 2025, to file if they registered before March 26.
Does this mean shell company prosecutions stopped? Not even close. DOJ filed a brief in February 2025 defending the CTA, arguing that anonymous shell companies “threaten U.S. national-security and foreign-policy interests.” The Justice Department is fighting to get the law reinstated while continuing to prosecute shell company money laundering cases under existing statutes.
In February 2025, Brink’s Global Services reached a non-prosecution agreement with DOJ and paid $50 million to settle allegations that it operated as an unlicensed money transmitting business, exposing gaps in anti-money laundering compliance related to unregistered foreign money services businesses. Three members of a Chinese money laundering organization pleaded guilty in May 2025 to laundering tens of millions in drug proceeds.
The government is still coming after shell company schemes – they’re just using 18 USC 1956, 18 USC 1957, and unlicensed money transmitting business charges instead of relying on the Corporate Transparency Act.
How Prosecutors Build These Cases
Federal prosecutors use Suspicious Activity Reports from banks. When you open a business account, the bank asks questions – what does your company do, where does revenue come from, what’s your business model. Give vague answers or provide information that doesn’t match actual account activity, and the bank files a SAR with FinCEN.
A review of SAR data shows shell companies in the United States have been used to move billions of dollars globally. FinCEN shares this data with DOJ, IRS Criminal Investigation, FBI, DEA, depending on what the underlying crime appears to be.
Prosecutors also look for patterns. Multiple shell companies controlled by the same person. Business accounts with high transaction volumes but no employees, no office lease, no utility bills, no ordinary business expenses. Companies that exist only on paper. Funds moving between shell companies with no apparent business purpose – that’s called layering, and it’s a classic money laundering technique.
Using someone else’s identity to control accounts is huge for prosecutors. That’s identity theft on top of money laundering. It shows consciousness of guilt – you knew what you were doing was illegal, so you tried to hide behind someone else’s name.
Wire transfers trigger reporting requirements. Deposits over $10,000 trigger Currency Transaction Reports. Structuring deposits to avoid the $10,000 threshold is itself a federal crime. The banking system creates a paper trail, and federal investigators know how to follow it.
Defense Strategies That Actually Work
We have former federal prosecutors on our team – they know how the government builds money laundering cases because they used to build them. That perspective matters when you’re fighting these charges.
Intent is everything in money laundering cases. The government must prove you knew the funds came from illegal activity and you conducted transactions specifically to conceal the source, ownership, or nature of the proceeds. If you genuinely believed the business was legitimate, if you didn’t know about the underlying fraud or drug trafficking, that’s a defense.
Challenging the connection between the shell company and the underlying crime matters. Prosecutors have to prove the money came from specified unlawful activity. If they can’t prove the predicate offense, the money laundering charge falls apart.
Cooperation is valuable, but you need experienced counsel before you talk to federal agents. Kadirov cooperated and got 30 months instead of potentially 10-20 years. But cooperation means providing substantial assistance that leads to other prosecutions – you can’t just say you’re sorry and expect leniency. Former prosecutors know what kind of cooperation the government actually values.
Early intervention sometimes prevents charges from being filed. If we can show prosecutors that transactions had legitimate business purposes, that you weren’t concealing criminal proceeds, that the shell company existed for legal reasons, we might resolve this before indictment. That’s not always possible – but it’s worth exploring before you’re facing a grand jury.
At Spodek Law Group, we’ve handled federal cases involving fraud, money laundering, drug trafficking, everything the government throws at defendants. We represented Anna Sorokin in the case that became a Netflix series – that was a fraud and theft case involving allegations of conning wealthy New Yorkers. Our managing partner Todd Spodek is a second-generation criminal defense attorney with many, many years of experience in federal court.
If you’re facing shell company money laundering charges, or if federal agents are asking questions about your business accounts, you need attorneys who understand both the financial side and the criminal side. We’re available 24/7, we handle cases coast-to-coast, and we only take cases where we believe we can make a real difference. Call us before you talk to investigators – that conversation can’t be undone.