How are shell company fraud and phony invoice fraud primarily executed?

Shell company fraud and phony invoice fraud are primarily executed by setting up shell companies to generate false invoices. Shell companies are typically created to disguise the true nature of a business and are often used to facilitate fraudulent financial activities. In this context, the fraudsters establish these companies with very little or no legitimate business purpose. Once the shell company is operational, they can issue fake invoices to other businesses or individuals, requesting payment for goods or services that were never provided. This is a deceptive method designed to siphon money from victims who believe they are engaging in legitimate transactions.

The use of shell companies is particularly insidious because it can create the illusion of a legitimate business relationship, making it easier for the fraudsters to evade detection. The invoices generated can also appear authentic, further compounding the difficulty of tracing the fraudulent activities back to the perpetrators. This method of fraud exploits the trust inherent in business relationships and the complexities of corporate structures, making it a favored technique among those committing financial crimes.