Shell games: A new grant for academic research

We’re delighted to announce a successful bid for research funding from the Canadian government’s Social Science and Humanities Research Council (SSHRC). The Tax Justice Network will be supporting the three-year project, led by Dr Masarah Paquet-Clouston of Université de Montréal, with Prof. Nicholas Lord and Dr Tomáš Diviák of the University of Manchester. Here’s the summary of the research proposal – more soon as work gets underway!

Facilitating Crimes for Financial Gains: Understanding the Dynamics of the Online Market for Shell Companies

This research sheds light on the emergent online market for the sale of shell companies. These companies, though legal in creation, are central to the organisation of illicit finances associated with serious crimes such as organised crime, white-collar offences, money laundering, and tax evasion. This centrality is significant as an estimated US$1.6 trillion of illicit finances flow through the global financial system each year, much of which is organised via shell companies.

Today, these companies can be purchased online at various prices and with varying features by anyone interested in obtaining a company quickly in a preferred jurisdiction without having to go through the company formation process themselves. This burgeoning online market lowers barriers to entry to any customers interested in concealing, controlling and/or converting criminal and illicit finances domestically and transnationally. Given this, there is a pressing need to better understand the size, scope, and structure of this online market, and what are the dynamics, networks, and conditions that underpin market supply, demand, and competition.

The primary goal of the research is to map out and comprehend the size, structure, and dynamics of the online market for shell companies. This involves identifying key suppliers and jurisdictions as well as understanding the structures, and mechanisms enabling this market.

To do so, four objectives have been established:

1. Provide a comprehensive representation of the online market for shell companies.
2. Examine the pricing strategies employed by shell company suppliers in relation to specific jurisdictional characteristics.
3. Understand shell suppliers’ specialisation in jurisdictions’ offering.
4. Illustrate the interconnections between suppliers’ jurisdictions and the jurisdictions of the shell company they offer.

Data will be collected online to meet these objectives, using a blend of quantitative methods including multilevel modelling and network analysis. A fifth objective aims to automate the data collection and analysis process for research continuity. Such automation will allow for regular audits of the market over time, build longitudinal datasets, and inform on the impact on the work of regulators and civil society, once policy actions take place.

The research is a collaborative effort between a team of interdisciplinary researchers from Université de Montréal and the University of Manchester and a key partner, the Tax Justice Network. The Tax Justice Network is a global network dedicated to pioneering research on the operation of tax and financial systems, their impact on society, equality and the economy, and the world of offshore tax abuse and financial secrecy. The participation of the Tax Justice Network as a partner ensures that the research is grounded in real-world applications and reaches a wide audience, including policy makers and the public.

Through its expertise, the network plays an integral role in the research by not only offering key datasets on jurisdictions’ characteristics, but also by contributing to the research design, data collection, interpretation of the findings and the drafting of evidence-based policy recommendations.

The study will uncover the dynamics behind this crime-facilitating transnational market. By integrating practical insights from the Tax Justice Network, the findings are expected to inform and enhance policy development, particularly in the areas of financial regulation, crime prevention, and international law, to counter the negative impacts of this emergent digital market.