Shell company indicator check FAQ
Background
What is the Shell company indicator check?
Moody's Analytics Shell company indicator check uses Passfort to reveal hidden risk during know-your-customer (KYC) onboarding and investigative processes. It focuses on potential shell company exposure and is integrated into a custom Passfort check, aligning with a KYC onboarding workflow. You can use Moody's Analytics insights from the Shell company indicator check to comply with anti-money laundering (AML) and countering the financing of terrorism (CFT) regulations, as well as detect fraudsters and criminal or corrupt actors.
This custom check works by applying Moody's Analytics built-in expertise to a rules-based engine that pre-processes Orbis data. This pre-processing generates indicators that highlight specific data properties or patterns that look suspicious as signals of shell company risk.
The Shell company indicator check aims to:
Harness shell company detection industry best practice
Provide deep big data analysis that isn't possible manually
Speed up onboarding and ensure effective robust risk management
Why was the Moody's Analytics Shell company indicator check developed as an indicator and not a score?
The Moody's Analytics Shell company indicator check better serves our customers as an indicator, not a blended risk score, because:
Shell companies are not intrinsically nefarious or illegal, so a blended risk score wouldn't provide actionable intelligence our clients could use.
Our flags and underlying contextualized data create insights that alert our clients to suspicious corporate behavior. Moody's Analytics clients use these insights to comply with regulations and act within their unique risk tolerance.
Regulators don't require the entities they oversee to measure or report a blended risk score.
Data
What underlying data is used?
The Shell company indicator check is powered by Orbis, a Moody's Analytics database of corporate information and insights.
The Orbis database has information on over 460 million companies and entities globally. About 46 million of these have detailed financial information. The database also includes extensive corporate ownership structures and a holistic view of companies.
Note that if an underlying data point is missing in a data field on the Data Explorer page, the individual field shows data unavailable.
In cases of missing data for the Directorship indicator:
If there are a significant number of missing data fields that result in the Directorship indicator not having enough data to meet the relevant threshold for that indicator, then the indicator color is blue to signify that the data is inconclusive. See the following section, Key concepts for more details.
Related reference materials:
Note that the Orbis Unique Contact Identifier or personal data may be inconsistent, as it's sourced from various registries.
Key concepts
What is meant by the terms indicator and sub-indicator?
An indicator is a broad category or theme of shell company risk and can contain several smaller and very specific sub-indicators. These indicators are pre-processed based on Orbis's update frequency, see How often are indicators updated?.
Examples:
Indicator: Directorships
Sub-indicator: Directors with an atypical number of current directorships
What is an indicator?
An indicator is a variable used to indicate a particular data property, or outlier characteristic, is present in a record. For the Shell company indicator check, the detection of risk in an indicator suggests the potential presence of a shell company.
Indicators are pre-processed and color-coded into three categories:
Green: No shell company risk was detected.
Red: Shell company risk was detected. Indicators are red if at least one sub-indicator has flagged data that exceeds a pre-defined threshold, even if data is missing from other sub-indicators.
Blue: Data was inconclusive to determine shell company risk. The Directorships indicator is blue when one or more sub-indicators do not have enough data available for Moody's Analytics to determine if a pre-defined threshold was exceeded, even if other sub-indicators are green.
How is an indicator triggered?
For each indicator, there are clear sets of rules that govern how they are triggered. The rules include when a condition is met and/or a threshold is exceeded.
Example of rule and threshold: Director has [x] directorships, which exceeds the threshold of [y].
Example of rule only: The algorithm has detected the presence of circular ownership.
What is a threshold?
The Shell company indicator check processes data using a rules-based engine. This allows the data to be interrogated in far more depth.
Shell company indicator check finds data or patterns in data that are suspicious because they deviate from the norm. Anything that deviates from the norm is deemed an outlier. This is possible by using a distribution curve.
In some cases, to improve accuracy, further segmentation is required, such as geographic, industry-based, or both. Data associated with behaviors can be different based on geographic and sectoral industry conditions and norms. Moody's Analytics has completed segmentation to tailor thresholds, providing more valuable insights.
Note
Specific thresholds are available for view within the Financial Anomalies indicator.
What is a parameter?
Parameters are displayed for each indicator. They provide a high-level summary of the performance of the relevant indicator and identify the data points or characteristics used to determine shell company risk.
What do pass and mean for the Shell company indicator as a custom check in Passfort?
When you run the Shell company indicator and the check completes, Passfort displays a task-level status of pass or fail.
Pass: All of the seven indicators, including all of their sub-indicators, were green. No shell company risk was detected.
Fail: At least one of the seven indicators was red. Shell company risk was detected. Note: In the case of the Directorships indicator, a red or blue flag would trigger a fail at the Passfort task level.
How often are indicators updated?
The background data is refreshed on a weekly basis within Orbis. The Shell company indicator check rules-based engine runs after this occurs, ensuring indicators are based on the most up-to-date data available. All indicators are pre-processed, as this reduces system latency that might result from spontaneous calculations.
Do the indicators highlight confirmed shell company exposure?
No. Because shell companies are legal entities, without inherent criminal purpose, the typologies Moody's Analytics chose as indicators are optimal to alert the user to suspicious behavior for potential shell company presence. It highlights potential risk where further investigation and analysis may be required.
Does the Shell company indicator check provide live results?
Indicators are pre-processed on a weekly basis aligned to the update process for Orbis. This means when a focal company is analyzed, the indicators displayed are in line with the most recent Orbis data available.
Can the indicators returning results be limited?
There is no granular mechanism at present to limit the seven indicators or sub-indicators. Completion of analysis is controlled at the Passfort task level.
Can threshold analysis and technical details be viewed?
Thresholds are currently only viewable in the Financial Anomalies indicator on its Data Explorer page. The following example shows the red flag of a Financial anomalies indicator, including the industry revenue per employee threshold and the years the focal corporate entity exceeded that threshold.
Can thresholds and calculations be modified or ignored entirely within the Shell company indicator check?
No. This is not possible at the current stage of the check. This functionality will be considered for inclusion in later phases of development.
Shell company indicator
Where can the Shell company indicator check be accessed?
The Shell company indicator check is integrated with Passfort. Passfort is a task-based platform in Moody's Analytics portfolio of KYC products.
The Shell company indicator data feed can be accessed through Moody's Analytics DataHub.
What indicators and sub-indicators are included in the check?
The table below displays the 15 sub-indicators grouped into seven broad indicator categories, or themes of shell company risk.
Indicator | Sub-indicator | Risk detected by: |
|---|---|---|
1. Directorships | 1.1: Directors with atypical number of current directorships | Threshold exceeded |
1.2: Directors with atypical number of previous directorships | Threshold exceeded | |
1.3: Directors with majority of previous directorships at currently inactive companies | Threshold exceeded | |
2. Circular ownership | 2.1: Surface any entity connected to the focal entity that is engaged within a circular ownership network | Condition met |
3. Jurisdictional risk disparity | 3.1: Target entity director nationality/residency ≠ target entity jurisdiction | Condition met |
3.2: Subsidiary director nationality/residency ≠ subsidiary jurisdiction | Condition met | |
3.3: Target entity BO nationality/residency ≠ target entity jurisdiction | Condition met | |
3.4: Target entity ultimate beneficial owner (UBO) nationality/residency ≠ target entity jurisdiction For each typology, one of these must be in a higher risk jurisdiction, based on EU list of non-cooperative jurisdictions for tax purposes and the FATF Black & Grey lists | Condition met | |
4. Mass registration | 4.1: Registration date window AND company name | Condition met |
4.2: Registration date window AND director name | Condition met | |
4.3: Registration date window AND address | Condition met | |
5. Outlier age of key individuals | 5.1: Outlier age – UBO | Threshold exceeded |
5.2: Outlier age – beneficial owner (BO) | Threshold exceeded | |
6. Dormancy | 6.1: Active companies that have been dormant for at least five years before changing to an active status | Condition met |
7. Financial anomalies | 7.1: Exceptionally high operating revenue divided by number of employees ratio | Threshold exceeded |
Get support or provide feedback
How do you reach support for a system outage or technical issue?
Send an email to MoodysShellCompanyIndicator@moodys.com or use the button on the Indicator list page to inform the Moody's Analytics Product Support Team of any system outages, technical issues, or feedback.
Provide as much of the following information as you can to help us resolve your issue:
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