Published: August 2025
Source: FIU–the Netherlands Annual Review 2024 (released in June 2025)
A Growing Threat: The Rise of Sham Companies in Financial Crime
In June 2025, the Dutch Financial Intelligence Unit (FIU–the Netherlands) published its Annual Review covering 2024, revealing a sharp rise in the misuse of legal business structures — including shell companies, straw owners, and offshore entities — to obscure illicit funds.
Criminal networks increasingly use front companies to funnel dirty money through legitimate financial channels. This challenges compliance teams to detect and report suspicious activity.
“The abuse of legal entities for criminal purposes is intensifying and becoming more complex.”
— Hennie Verbeek-Kusters, Director of FIU–the Netherlands
What Is a Sham Company? (Definition)
According to Eurofound’s study on fraudulent contracting in the EU, a sham company is set up with minimal economic substance, registers employees, and is then liquidated once the contract is complete. Managers resign, upfront capital disappears, and the business declares bankruptcy, leaving unpaid social security and taxes in its wake. These companies are often part of larger, cross-border subcontracting schemes.
Key Findings from the FIU 2024 Report
- 3.5 million unusual transaction reports were filed in 2024
(up from 2.3 million in 2023 — a 50% increase) - 118,408 suspicious transaction reports (STRs) were forwarded to law enforcement
- 16,306 case files were opened
- Significant growth in structures involving multiple front companies, offshore links, and third-party payers
Read the full FIU report (PDF)
View report summary on FIU website
Typologies: How Front Companies Are Used
1. Sham Legal Entities
- Criminals register shell companies in the Netherlands or abroad with little to no real economic activity.
2. Third-Party Payments
- Unrelated parties make transactions, making it difficult to assess the true source or purpose of funds.
3. Cash Compensation Models
- Common in sectors like construction and logistics: subcontractors get paid in cash, then reimburse shell companies via fake invoicing. See FIU Knowledge Base on this model.
4. Real Estate Laundering
- Opaque entities are used to acquire properties as a way to park criminal proceeds. These assets may then be used for further illegal activities like cannabis cultivation or illegal gambling.
Compliance teams have to do far more than verify documents. The FIU’s findings call attention to key red flags and risk patterns that must be embedded into your ongoing due diligence efforts:
What This Means for Compliance & KYC Professionals
- Newly registered companies with high transaction volumes
- Multiple ownership layers or connections to known offshore leak databases
- Use of third-party payers or invoice structures with unclear logic
- Real estate purchases inconsistent with the company’s declared activity
How Business Radar Helps Detect These Risks
At Business Radar, we provide clients with the exact data and technology needed to identify and act on these red flags:
- UBO data spanning national and international registries
- Visualized corporate ownership structures, including multi-layered setups
- Integration with the Offshore Leaks, Pandora Papers, and similar datasets
- Advanced fuzzy matching for names, addresses, and linked entities
- Screening for adverse media, PEP exposure, and regulatory actions
Our clients use these tools to quickly spot shell behavior, cross-border risks, and hidden connections — well before they make it into enforcement headlines.
A Wider EU Context
The Dutch FIU’s findings mirror broader European efforts to clamp down on financial crime. With the publication of EU Regulation 2024/1624, the European Union is moving toward standardized AML rules, more transparent beneficial ownership, and stronger real-time monitoring expectations.
Final Takeaways
- Front company abuse is accelerating — especially in construction, logistics, and real estate.
- The Dutch FIU’s Annual Review (2024, published June 2025) provides essential intelligence on emerging typologies.
- Tools like Business Radar can help compliance teams detect, verify, and act on risky structures quickly.
Don’t wait for a regulatory breach to review your KYC framework.
Take proactive steps to screen deeper and see beyond today with Business Radar.