Glossary term
Company Formation Agents
Subject: Financial Crime, Money Laundering, Typologies and Asset Recovery
Also known as: Company formation service providers, Incorporation agents, Corporate formation agents
Company formation agents are professional firms that register companies for clients and often also supply a registered address, nominee directors or shareholders, and administration. In many countries they are gatekeepers for AML purposes.
Explanation
A formation agent files the paperwork, helps pick the legal form and may provide a registered office, company secretary, bank introductions and sometimes nominee directors. The work is normal and lawful, but company structures are the main tool for concealing ownership, so agents are a point where misuse can be caught. FATF treats them as part of the trust and company service sector, which should carry out customer due diligence, identify the beneficial owner and report suspicious activity. Agents that sell off-the-shelf shells in bulk, accept cash or crypto, or never meet clients are higher risk. Some jurisdictions licence and supervise them; others do not, a recognised weakness. Banks ask whether a customer’s structure was set up by an agent, and where. Banks and regulators lean on these agents to identify owners before a company ever opens an account.
Example
A formation agent in a small jurisdiction is asked by a new client online to set up five companies in a week, pay in crypto and use the agent’s nominee directors. The client supplies only a scanned passport. The agent’s compliance officer asks for beneficial owner details and the reason for five entities. The client withdraws, and the agent files a suspicious activity report.