This month’s BEV Break was all about fraud that hides in plain sight. Middesk’s Jules Mei took us behind the curtain on shelf, shell, and synthetic companies — three rising fraud vectors that bad actors are using to sneak through onboarding and move illicit money.
These entities are increasingly intertwined, which makes them even harder to spot using traditional KYB methods. Here's a rewind of the key takeaways and actionable steps your team can take to stay ahead.
The anatomy of shelf, shell, and synthetic fraud
These fraud vectors may look different on paper, but together, they make up a powerful system of deception:
- Shell companies: Empty legal entities with no real operations — perfect for laundering money or hiding criminal activity.
- Shelf companies: Previously registered businesses with no activity. Fraudsters buy these to look “aged” and trustworthy on paper.
- Synthetic companies: Built using a mix of real and fake data — stolen SSNs, fabricated names, phony EINs — to pass surface-level KYB checks.
What makes them dangerous is how seamlessly they can blend in. They’re designed to look clean during onboarding, then flip the switch later.
📽️ Watch Jules explain how fraud rings combine these business types to evade detection:
What traditional KYB misses (and why fraudsters know it)
Even the most robust legacy KYB programs often fall into the same trap: verifying paperwork without validating real-world activity.
What gets checked:
- Business registration
- EIN or tax ID
- Incorporation date
- Listed ownership
What gets missed:
- Is the business actually operating?
- Do financials match the claimed activity?
- Are there suspicious links to other high-risk entities?
Jules compared it to an iceberg — the stuff above the surface looks fine, but the risk of hidden ownership changes, circular transactions, and fake digital footprints all live below. And unless you dig deeper, you won’t see it until it’s too late.
📽️ Hear how Jules recommends KYB teams go deeper than the docs — and why network analysis is key:
How to stop shell and shelf company fraud before it starts
Jules shared a fraud defense playbook used by top fintechs and national banks — one that’s rooted in better data, smarter detection, and cross-functional collaboration:
Start with a KYB audit
- Are you going beyond registration checks?
- Are you looking for ownership spikes, activity bursts, and linked agents?
Rethink your signals
- Payroll data: Do employee counts make sense?
- Address consistency: Does the location match the industry?
- Web presence: Is this business real online, or just on paper?
Build the right team
- Fraud and compliance teams can’t do it alone.
- Partner with product and data science to build flexible, automated fraud models that adapt over time.
Quick win:
- Run an audit on high-risk businesses approved in the past 12 months.
- Look for ownership changes, dormant-to-active patterns, or links to known fraud rings.
📽️ Jules walks through how leading teams are using this playbook to flag fraud before it spreads:
Want to keep learning?
Next month’s BEV Break digs into risky Secretary of State filing changes—another early fraud indicator to watch. Reserve your spot here.
