Phantom firms are anonymous shell companies which only exist on paper. They are used by criminals and corrupt businesses to hide money, rip off governments and avoid tax.
You can create a phantom firm with less information than you need to obtain a driver’s licence or open a bank account, and they are completely legal.
They allow the people who own or control them (the “beneficial owners”) to keep their identities hidden. This means illicit cash flows can be channeled through them without that money being traced.
Phantom firms are commonly used by corrupt government officials and others to rob African countries of billions every year. Illicit financial flows cost sub-Saharan Africa £33.1bn in 2010, more than the total amount of aid received by the region in the same year.
These resources could be used to improve the lives of some of the poorest people in the world, through investment in healthcare, education or agriculture. They undermine good governance, along with prospects for investment and growth.
ONE is calling for a global crackdown on phantom firms. We want information about who owns companies and trusts to be made public. Armed with this information, citizens will be able to root out corruption and help to ensure that resources are used to fight extreme poverty rather than lost to dodgy deals.
Get the facts
- 70% of large corruption cases have been found to use phantom firms.
- Developing countries lost £555.6bn through illicit financial flows in 2010.
- The DRC lost £880m in just five mining deals from 2010-12 through mispricing of assets using phantom firms. That’s the same as the entire national education budget for the same three years.